Significant Federal Student Loan Changes Take Effect in 2026, Impacting Borrowing Limits and Repayment Plans

Major changes to federal Direct education loans, stemming from the Working Families Tax Cut Act (also known as the One Big Beautiful Budget Act), are taking effect in 2026. These changes include the discontinuation of the Grad PLUS program for new borrowers, with new graduate caps set at $20,500 per year for most master's programs ($100,000 lifetime) and $50,000 per year for professional programs ($200,000 lifetime). Additionally, the Pay As You Earn (PAYE) and Income-Contingent Repayment (ICR) plans are being deprecated, with new borrowers after summer 2026 navigating a streamlined two-track model for repayment. Existing borrowers on these plans can remain until 2028.