Federal Student Loans Undergo Major Changes July 1

Federal student loan regulations experienced substantial alterations on July 1, 2026, driven by the "One Big Beautiful Bill Act" (OBBBA) passed last year. These changes affect repayment plans and borrower options managed by the Department of Education. The most significant immediate impact is the elimination of the Saving on a Valuable Education (SAVE) repayment plan, an income-driven repayment (IDR) program that allowed for payments as low as $0 based on income. Loan servicers began notifying current SAVE plan borrowers, providing a 90-day window to switch to an alternative plan or face automatic enrollment in a different program.

Beyond the SAVE plan's discontinuation, two other income-driven repayment plans, the income-contingent repayment (ICR) plan and the pay as you earn (PAYE) plan, are slated for future elimination. While these plans will not disappear immediately, the OBBBA mandates their removal no later than July 1, 2028. Borrowers currently enrolled in ICR or PAYE may remain on these plans until that date, though the Department of Education's wording suggests they could be transitioned off these plans sooner than the final deadline.

These adjustments represent a significant overhaul of federal student loan management, aiming to streamline repayment options. The Department of Education is introducing new programs to replace the eliminated plans, though specific details on these new offerings are still emerging. Borrowers are advised to monitor communications from their loan servicers and the Department of Education to understand how these changes will affect their individual loan repayment strategies and to ensure they select the most suitable repayment plan moving forward.