Major Federal Student Loan Changes to Take Effect July 1, 2026, Under New Act

Sweeping changes to federal student loans, enacted by the Working Families Tax Cuts Act (also known as the One Big Beautiful Bill Act), are set to take effect on July 1, 2026. These reforms include a new income-driven repayment plan (Repayment Assistance Plan - RAP) and a new Tiered Standard repayment plan. Borrowers in auto-pay will receive an additional 0.75% interest rate reduction, bringing the total reduction to 1% for Federal Direct Loans originated after July 1, 2012. Grad PLUS loans will be eliminated for new borrowers, and new annual and lifetime loan caps will be imposed for graduate and professional degrees. Pell Grant eligibility rules are also tightening.