Student Loans After the One Big Beautiful Bill Act: What Families Need to Know

This year, there’s even more to unpack. On July 4, 2025, the One Big Beautiful Bill Act became law, ushering in major changes to the federal student loan system. While some rules take effect immediately, many shift in 2026 and beyond—giving borrowers a window to adjust their strategy.

Here’s what’s changing, who’s most affected, and steps to take now.

Major Changes at a Glance

Loan limits

• Grad PLUS loans eliminated starting July 1, 2026.
• Grad students capped at $20,500/year ($100,000 lifetime); professional students (med, law, dental) at $50,000/year ($200,000 lifetime).
• Parent PLUS loans capped at $20,000/year ($65,000 lifetime).

Repayment plan overhaul

• SAVE, PAYE, and ICR plans will sunset.
• New Repayment Assistance Plan (RAP) offers forgiveness after 30 years.
• IBR eligibility expands—no more partial-financial-hardship test.
• After July 1, 2026, Parent PLUS borrowers lose IDR eligibility for new loans unless consolidated before that date.

Pell Grant expansion

• Starting 2026–27, short-term workforce programs (like HVAC or coding) qualify for Pell Grants.

Reduced relief options

• After July 1, 2027, unemployment/economic hardship deferments end for new loans.
• Forbearance capped at nine months within a 24-month window.

Other notables

• Second chance at loan rehabilitation starting in 2027.
• FAFSA will no longer count family farms/small businesses as assets (2026–27 school year).

What This Means for Current Borrowers—Especially High-Income Earners

If you’re pursuing Public Service Loan Forgiveness (PSLF) or income-driven repayment (IDR) forgiveness, the shifting rules could impact your entire payoff plan. Deadlines—especially July 1, 2026—are critical.

High-income borrowers in the SAVE Plan should pay close attention: payments in SAVE’s current forbearance status may not count toward forgiveness, and switching to another IDR plan now can lock in lower payments based on today’s income.

Choosing the Right Repayment Path–Repayment options depend on when you first borrowed:

• Before October 2007 – Old IBR: 15% of discretionary income; spouse’s income excluded if filing separately.
• October 2007–July 2014 – PAYE: 10% of discretionary income; lock in before it sunsets in 2028, then move to Old IBR.
• After July 2014 – PAYE or New IBR: 10% of discretionary income; New IBR offers more long-term flexibility.

Parent PLUS borrowers: consolidate before July 1, 2026, to access IBR and avoid being locked into the 10-year standard plan.

Understanding the New RAP Plan

RAP launches by July 1, 2026, for new borrowers.

• Payments start at $10/month, rising to 10% of AGI above $100,000.
• Offers interest waivers and small principal credits.
• Forgiveness after 10 years for PSLF, 30 years for IDR.
• Watch out: Married Filing Jointly households pay based on total combined income, which can sharply raise payments. Tax strategy will matter.

Is It Time to Refinance Privately?

Private refinancing may lower your interest rate, but you lose federal protections like PSLF and IDR forgiveness. It’s only smart if you plan to pay off your balance in full without federal program benefits.

Planning Ahead for Future Education Costs

The new loan caps mean future grad and professional students may not cover tuition with federal loans alone. This shifts the gap to savings, private loans, and scholarships—especially for high-income families who don’t qualify for need-based aid.

Three steps now:

1. Review your 529 plan or education savings.
2. Project costs for planned graduate/professional degrees against new federal limits.
3. Meet with a financial planner who understands both college funding and loan strategy.

The Bottom Line

The OBBBA reshapes student loans in ways that will be felt for decades—especially by high-income earners and families funding advanced degrees. Waiting until 2026 to react could mean missed opportunities, higher payments, or limited repayment options.

Now is the time to:

• Mark key deadlines like July 1, 2026.
• Evaluate your repayment plan before rules change.
• Align your loan strategy with your broader financial goals.

At Focus Partners Wealth, we help clients navigate these changes so that student loans don’t derail the bigger picture. The rules are complex, but the right plan now can set you up for a far smoother future.

Federal Student Loans: Before vs. After the One Big Beautiful Bill Act (OBBBA)

Sources: Congress.gov., savingforcollege.com, the American Enterprise Institute, the College Investor, studentaid.gov, the Education Department, and Forbes.

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