While much of the attention related to President Trump’s “One Big Beautiful Bill Act” has been focused on the impact to the funding and future of the Consumer Financial Protection Bureau, the bill, which was signed into law on Friday enacts wide-reaching reforms to federal student loan borrowing, repayment, and eligibility requirements that will take effect starting July 1, 2026.
Why it matters: These changes could impact how millions of Americans repay their student loans and may limit access to federal funding for education. For companies that collect on student loans or serve consumers with education debt this could affect repayment capacity, consumer behavior, and demand for alternative financing.
Key student loan changes:
- Caps on borrowing:
- Graduate students: $100,000 lifetime limit
- Medical and law students: $200,000 lifetime limit
- Parents borrowing through Parent PLUS: $20,000 per year per child, $65,000 total cap
- Repayment plans simplified: Borrowers taking out loans after July 1, 2026, will be limited to:
- A standard fixed-rate repayment plan (10 to 25 years depending on loan size)
- A Repayment Assistance Plan (RAP) with payments ranging from 1% to 10% of discretionary income
- End of forgiveness as we knew it: RAP offers forgiveness after 30 years, up from 20-to-25 years in current plans, but eliminates $0 payments for the lowest-income borrowers.
- SAVE plan changes: The 8 million borrowers enrolled in the Biden-era SAVE plan must choose a new repayment plan between July 2026 and June 2028. Those who don’t will be automatically placed in RAP.
- Elimination of the Grad PLUS loan program: Borrowing options for graduate students will be scaled back significantly, especially at institutions that rely heavily on graduate tuition.
- Forbearance and deferment limits: Deferments due to unemployment or hardship will be eliminated for new borrowers. Forbearance will be capped at nine months in any 24-month period.
What we’re watching:
- How these changes influence consumer financial behavior and the demand for private student loans
- Potential ripple effects in household debt management and repayment rates
- Whether changes to loan eligibility and repayment increase delinquencies or demand for credit counseling
The bottom line: With more than 42 million Americans holding federal student loans, the sweeping changes will touch nearly every corner of the lending, servicing, and collections ecosystem. Companies that collect on federal or private student loans, or on other consumer debts, may need to reassess their strategies in light of shifting repayment plans, reduced deferment options, and altered consumer financial profiles.
