Big Federal Student Loan Shake-Up Is Coming in 2026
If you’ve felt confused or overwhelmed by student loans over the past year, you’re not alone — and unfortunately, 2026 is shaping up to bring even more dramatic changes. The federal student loan system is being rewritten in ways that will affect how much people can borrow, how they repay their loans, and what forgiveness options remain on the table.
One of the biggest shifts is the end of the SAVE Plan, the Biden-era repayment option that had become extremely popular with millions of borrowers. That plan was praised for offering very low monthly payments, sometimes even $0, and faster paths to forgiveness. But it was also challenged in court by Republican-led states, and after months of legal uncertainty, a settlement was reached that will officially shut SAVE down. Roughly seven million borrowers who relied on it are now being moved into other repayment plans, many of which will likely come with higher monthly bills. For people who planned their finances around SAVE, the ground has suddenly shifted beneath them.
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The changes don’t stop there. Repayment options as a whole are being simplified — or, depending on how you look at it, narrowed. Two familiar income-based plans, PAYE and ICR, are being phased out over the next few years. In their place, new borrowers will eventually choose between just two plans: a revised standard plan with repayment terms stretching up to 25 years, and a new income-driven option called the Repayment Assistance Plan, or RAP. RAP is designed to stop balances from growing, since unpaid interest will be waived and very low payments may even be matched by the government. However, forgiveness under RAP won’t arrive until 30 years, which is a longer wait than many borrowers are used to.
Another major shift is happening on the borrowing side, especially for graduate students and parents. Starting July 1, 2026, the Grad PLUS loan program is being shut down for new borrowers. Instead of borrowing up to the full cost of attendance, graduate students will face annual and lifetime caps. Professional degree students, like future doctors or lawyers, will still be allowed higher limits, but many others may find themselves facing funding gaps that push them toward private loans. Parents using Parent PLUS loans will also see new caps, limiting how much they can borrow per child.
All of this is unfolding against a troubling backdrop. Millions of borrowers are already delinquent or in default, and wage garnishment is set to resume in early 2026. Advocates warn the system may be approaching a “default cliff,” while policymakers argue the reforms will restore balance and accountability.
So as 2026 approaches, one thing is clear: federal student loans are entering a new era — one that will demand closer attention, tougher choices, and far more planning from borrowers than ever before.
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