The SAVE student loan plan ends July 1 as new repayment plans and borrowing limits take effect

On July 1, federal student loan servicers will begin notifying about 7.5 million borrowers enrolled in the Saving on a Valuable Education (SAVE) plan that they have roughly 90 days to move to a different repayment plan. The same date starts two new repayment plans, the Repayment Assistance Plan (RAP) and a Tiered Standard Plan, and sets annual borrowing caps for graduate and parent borrowers who take out loans on or after that day. The changes come from the 2025 budget reconciliation law that NPR and most outlets call the One Big Beautiful Bill Act, and that the Department of Education refers to as the Working Families Tax Cuts Act.

What is ending

SAVE was the Biden administration's income-driven repayment plan. It drew legal challenges, and federal courts blocked it. A court ended the plan this year by approving a settlement between the Department of Education and the State of Missouri. The Department, which calls SAVE "unlawful," said in a March 27 statement that under the settlement it will not enroll new borrowers in the plan and will move existing enrollees into other plans.

Servicers will tell each borrower their specific 90-day deadline. Borrowers who do not pick a new plan within that window will be placed in either the Standard Repayment Plan or the new Tiered Standard Plan, the Department said.

"Borrowers currently enrolled in the illegal SAVE Plan will be given at least 90 days to enter a legal repayment plan of their choice, including the new Repayment Assistance Plan, which will launch on July 1," Under Secretary of Education Nicholas Kent said in the March statement.

Financial aid experts told NPR that pushing millions of borrowers into repayment and into plans that cost more than SAVE could add to a rise in student loan defaults, in part because many SAVE enrollees had qualified for $0 monthly payments based on low incomes.

The two new plans

Repayment Assistance Plan (RAP). Monthly payments are based on a borrower's adjusted gross income, so higher earners pay more. The Department's published examples put a borrower earning $30,001 to $40,000 at roughly $75 to $100 a month, and a borrower earning $50,001 to $60,000 at about $208 to $250. RAP waives monthly interest above the scheduled payment, includes a principal-matching payment so lower-income borrowers reduce their balance each month, and cuts $50 from the monthly payment for each dependent. Any remaining balance is forgiven after 30 years, longer than the 20- or 25-year forgiveness on older income-driven plans. The plan is not indexed to inflation.

Tiered Standard Plan. Payments are fixed and the repayment term scales with the balance: 10 years for balances under $25,000, 15 years for $25,000 to $49,999, 20 years for $50,000 to $99,999, and 25 years for $100,000 or more.

Borrowers who take out any loan on or after July 1 will be limited to those two plans. Borrowers with only older loans keep access to existing plans, including Income-Based Repayment (IBR), for now. The Income-Contingent Repayment (ICR) and Pay As You Earn (PAYE) plans will be phased out by July 1, 2028, after which IBR will be the remaining older income-driven option.

New borrowing limits

For loans taken out on or after July 1, graduate students will be capped at $20,500 a year and $100,000 total, replacing the prior rule that let them borrow up to the cost of their program. Eleven categories of professional degrees keep a higher limit of $50,000 a year and $200,000 total: chiropractic, clinical psychology, dentistry, law, medicine, optometry, osteopathic medicine, pharmacy, podiatry, theology, and veterinary medicine. Several states have sued over the limits, arguing they could worsen shortages of nurses and other health workers.

Parent PLUS loans will be capped at $20,000 a year per dependent child, with a $65,000 total per child. Parents who borrow after July 1 will be able to use only the Tiered Standard Plan, which means new Parent PLUS borrowers will not qualify for an income-driven plan or for Public Service Loan Forgiveness. Undergraduate borrowing limits are unchanged.

Pell and public service forgiveness

The law expands the Pell Grant, which does not have to be repaid, to cover short-term workforce training programs that run eight to 15 weeks, such as training for certified nursing assistants or welders. The maximum traditional Pell award for 2026-27 is $7,395, and awards for short-term programs will be prorated by length. The Department has said many existing programs may not qualify at first.

Public Service Loan Forgiveness still exists, and IBR, ICR, PAYE, and RAP all count toward it. Effective July 1, the Department says it can deny forgiveness to borrowers whose government or nonprofit employer engages in activities with a "substantial illegal purpose," a term the education secretary defines. Several cities, including Boston and Chicago, sued over that rule in late 2025, and the case is ongoing.

About 43 million Americans hold roughly $1.7 trillion in federal student loan debt.