Recent legislation is reshaping federal student loans. EP Wealth outlines key deadlines and actions that students, parents, and borrowers may want to consider before mid-2026.
Recent federal legislation — the One Big Beautiful Bill Act (OBBBA) — is introducing significant changes to how students and families can borrow for college, how loans are repaid, and what hardship protections are available. Several of these changes take effect in mid-2026, and some may call for action in the coming weeks and months.
This blog is designed to help you find the information most relevant to your situation. Whether you're a parent of a current college student, helping a family member prepare for graduate school, or managing your own federal student loans, the sections below are organized so you can focus on what applies to you.
Before diving into specific action steps, here is a brief overview of the key shifts taking place.
Forgiven balances become taxable. Beginning in 2026, student loan balances forgiven under income-driven repayment plans are expected to once again be treated as taxable income.
For families with a student currently in an undergraduate or graduate program, there is a potential opportunity to preserve access to today's more flexible borrowing limits.
Under the new legislation, borrowers who take out at least one federal loan before July 1, 2026 may be grandfathered under current borrowing rules for the remainder of their program, for up to three years. The U.S. Department of Education and financial aid professionals have suggested that students and families who wish to preserve this flexibility may want to act by June 1, 2026 to allow time for processing.
The specific step is straightforward: borrowing at least $100 in each applicable type of federal loan — which could include Unsubsidized Direct Loans, Graduate PLUS Loans, and Parent PLUS Loans — may allow the borrower to continue accessing current limits rather than the reduced caps that take effect after July 1. This is a conversation worth having with your student's financial aid office, as the details will depend on the specific loans available to your student.
This is especially relevant given the scope of the changes ahead. Here is a comparison of current and upcoming loan limits:
Note: “Certain professional programs” referenced above include 11 degrees within medicine, law, dentistry, pharmacy, veterinary medicine, and certain clinical psychology and theology programs. Final definitions and rules are expected in 2026.
It is also worth noting that any new borrowing after July 1, 2026, may affect eligibility of existing loans for future repayment plans and the repayment options available. Families should discuss this with their student's financial aid office as part of their planning.
For families with a student preparing to enter a graduate or professional program in fall 2026, the elimination of Graduate PLUS loans on July 1 is a significant change. Currently, Graduate PLUS loans can cover remaining attendance and living expenses beyond what Direct loans provide. Once that option goes away, graduate students will be limited to the new annual and lifetime caps outlined above.
One option that may be worth exploring: if the program and institution allow it, enrolling in a spring or summer term before July 1 could provide access to Graduate PLUS loans and potential grandfathering under current loan limits. Availability depends on the institution and the specific program, so this is a conversation to have with the school's financial aid and admissions offices sooner rather than later.
Families may also want to consider whether it makes sense for the student to borrow the maximum available in undergraduate Direct loans while still enrolled, if those funds may be needed for graduate school down the road.
Two additional items to be aware of:
The repayment landscape for federal student loans is shifting substantially. If you or someone in your family currently holds federal student loans, it is worth reviewing which repayment plan you are on and whether adjustments may be appropriate before the new rules take full effect.
Here is a summary of what different borrowers may want to consider, based on their current repayment plan:
If you're on the SAVE plan: A recent court order has ended the program, and the U.S. Department of Education is winding it down. Borrowers will need to transition to a new repayment plan. Your loan servicer will contact you with a deadline, and you’ll have 90 days to select an alternative. If no action is taken, you will be automatically placed into a different plan based on your circumstances.
New options—including the Repayment Assistance Plan (RAP) and a Tiered Standard Plan—are expected to become available on July 1, 2026. RAP, in particular, is expected to offer income-based payments, interest subsidies, and a key benefit: your loan balance will not grow as long as you make required monthly payments.
It may be worth evaluating IBR and the new Repayment Assistance Plan (RAP) as alternatives. Resuming interest payments now, if possible, can help limit balance growth. If IBR appears to be the better fit, as expected for most borrowers not anticipating low, long-term income, switching earlier rather than later may help avoid processing delays. It is possible that borrowers on RAP may not be able to re-enroll in IBR after July 1, 2028, due to OBBBA.
RECENT UPDATE: You may have received an April email from the U.S. Department of Education providing notification that your loan servicer will be contacting you with a deadline to choose a different repayment plan. Once you hear from your loan servicer, you will have 90 days to choose another repayment plan.
If you're on PAYE or ICR: Both plans are expected to transition to IBR or RAP before July 1, 2028, and possibly sooner. Reviewing the available options and considering a proactive switch may be worthwhile.
If you're on IBR or a Fixed Repayment plan (Standard, Graduated, or Extended): No immediate action is expected. However, RAP may be worth evaluating after July 2026, particularly for borrowers with lower long-term income expectations.
For all borrowers: It is a good idea to confirm that your contact information is current on studentaid.gov, along with all loan servicers, and to monitor communications for any required repayment plan changes. Borrowers should also be aware that taking out new federal loans after July 1, 2026, could affect repayment terms on existing loans.
After July 1, 2026, new federal student loans will have two repayment plan options: Tiered Standard and the Repayment Assistance Plan (RAP).
Tiered Standard is a fixed-payment plan where the repayment term depends on the total amount borrowed:
Repayment Assistance Plan (RAP) is an income-driven option where monthly payments are calculated as a percentage of adjusted gross income. RAP may be eligible for loan forgiveness after 30 years of qualifying payments. Parent PLUS loans and Parent PLUS consolidation loans do not qualify for RAP.
For Parent PLUS loan borrowers who have not already applied for a consolidation loan, this means they are no longer expected to be eligible for income-driven repayment plans. Carefully consider whether any new parent loans are likely to be paid off before retirement, factoring in potential gaps in employment. Social security wages may be garnished up to 15% to pay federal student or parent loan balances.
Monthly payment amounts shown are before subtracting $50 per dependent. Minimum payment after deductions is $10.
For federal student loans issued on or after July 1, 2027, economic hardship and unemployment deferments may be eliminated. Forbearance is expected to be limited to a maximum of 9 months within any 24-month period.
Existing loans may be grandfathered under prior repayment rules, subject to planned transitions. However, borrowers who receive disbursements on new loans or on a new consolidation loan on or after July 1, 2026 may lose access to IBR, ICR, or PAYE even if they were previously enrolled in those plans. Discuss your options with your school’s financial aid office and loan servicers. Consider asking whether they can provide information in writing.
It is important to note that student loan balances forgiven under income-driven repayment (IDR) plans, including IBR and RAP, are currently treated as taxable income.
For borrowers or family members pursuing Public Service Loan Forgiveness, a few updates are worth noting.
PSLF currently remains tax-free at the federal level for eligible borrowers, though state tax treatment may vary. For new borrowers going forward, only payments made under the 10-year Tiered Standard plan and RAP are expected to count toward PSLF. Payments under Tiered Standard terms longer than 10 years are not expected to qualify.
A proposed rule change from the Department of Education would revise the definition of "qualifying employer" beginning in July 2026. This change is currently subject to legal challenge, so the outcome remains uncertain.
When considering new borrowing, it may be worth factoring in how current and pending legislation could affect PSLF eligibility and potential forgiveness amounts.
These changes affect families in different ways, and the steps that make sense will depend on your individual circumstances:
If you have questions about how these changes may affect your family, connecting with your EP Wealth advisor is a good place to start. Our financial planning team can help you review your situation and consider how education funding aligns with your long-term goals.
For the most current information on federal student loan programs, visit studentaid.gov.
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