Major changes are coming to the federal student loan system in 2026, stemming from the One Big Beautiful Bill Act (OBBBA). Starting July 1, 2026, new loans will have two repayment options: Standard Repayment Plan with fixed monthly payments and a 10-25 year span, or Repayment Assistance Plan with income-driven payments and possible forgiveness after 30 years.

Existing borrowers before July 1, 2026, can continue with three current repayment plans: 10-year Standard Plan, 10-year Graduated Repayment Plan, and 25-year Extended Plan. Additionally, income-driven repayment plans like PAYE, ICR, and IBR can be used until 2028 before switching to a new plan.

For loans disbursed after July 1, 2026, only the new Repayment Assistance Plan (RAP) will be available as the sole income-driven option. PAYE and ICR will sunset by July 1, 2028, while IBR will remain but only for loans disbursed before July 2026.

The federal student loan system will have revised borrowing limits for different loan types starting July 1, 2026. Graduate students can borrow up to $20,500 per year, professional students up to $50,000 per year, and parent borrowers up to $20,000 per year per student.

The Grad PLUS loan program will be eliminated after July 1, 2026. Parent PLUS loans will not be eligible for the new Repayment Assistance Plan, impacting future eligibility for Public Service Loan Forgiveness for parent borrowers. Income-driven repayment plans for new loans will be limited to RAP.

New federal student loans issued after July 1, 2027, will no longer be eligible for economic hardship or unemployment deferments. Forbearance will also be limited to a maximum period of nine months during a two-year period.

Student loan forgiveness from income-driven plans may be subject to federal taxation after 2025. Public Service Loan Forgiveness remains exempt from federal taxes. Borrowers should review their repayment plans, compare future options, note key deadlines, plan for tighter borrowing limits, and consider tax implications.

Read more at Yahoo Finance: Student loans will look different in 2026. Here’s what’s changing.