The administration unveils four major changes—new borrowing limits, how older loans are treated, revised repayment options, and automatic-pay discounts—intended to simplify and discipline debt repayment, though advocacy groups warn they could raise monthly payments for many, push low-income borrowers toward private lenders, or deter some from pursuing higher education.

New lifetime borrowing caps on federal student loans set at $257,500 per borrower, with annual and total limits for graduate and professional students (up to $20,500 per year and $100,000 total for graduates; professionals up to $50,000 per year and $200,000 total; parents up to $65,000 per child), with exemptions for students enrolled for three years.

The plan consolidates repayment into two options: the Repayment Assistance Plan tied to adjusted gross income with payments lasting 30 years before forgiveness, and the Tiered Standard Plan based on loan balance over 10 to 25 years, replacing the previous spectrum of plans and gradually phasing out SAVE.

Existing SAVE borrowers have at least 90 days to switch to one of the new plans or stay with an older income-driven option; the Income-Based Repayment option remains, but many Biden-era plans are ending, which could raise monthly payments for some as balances accrue interest since mid-2025.

The overhaul of the federal student loan system takes effect this week, moving oversight from the Education Department to the Treasury and reducing the number of repayment options.

Graduate and professional students face strict new limits, with ongoing legal battles over who qualifies as a professional student and how certain degrees are categorized, affecting eligibility in fields like healthcare.

Interest rates rise under the new regime for all borrowers—6.52% for undergraduates and 8.07% for graduates—with an automatic 1% rate cut for those enrolled in auto pay by September 30, 2028 to encourage timely payments.