Trump's student-loan repayment overhaul has arrived — with borrowers facing new limits and higher bills

President Donald Trump’s student-loan changes are here — and for many borrowers, the biggest change will be their monthly bill.

On July 1, the Department of Education rolled out new repayment plans, stricter borrowing caps for graduate students and parents borrowing for their kids, and new limits that could reshape who qualifies for a popular loan forgiveness program for public servants.

Millions of borrowers “will face massive sticker shock this summer and autumn as they are pushed to transition into other repayment plans,” said Sara Partridge, associate director of higher education at the left-leaning think tank Center for American Progress.

Cassandra Kormendy, a 39-year-old borrower, said her $530 payment is projected to surge to $1,200, and she doesn’t know how she’ll afford that increase. “I’m scared to not pay them and what will happen,” Kormendy said.

Undersecretary of Education Nicholas Kent said in a statement that the changes, which stem from Trump’s “big beautiful” spending law, will address “longstanding challenges in higher education and federal student lending, including exorbitant tuition costs, unchecked borrowing, and a confusing maze of repayment options that too often leave borrowers with higher balances despite making payments.” How will Trump’s student-loan changes affect you?

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The July 1 rollout doesn’t affect every borrower in the same way.

Some changes are immediate and require action soon.

Others will matter more for future students and their parents, while a few major questions, including collections for borrowers who are already in default, are still unresolved.

Among the biggest issues borrowers will face are the transition to new repayment plans.

Two new repayment plans became available on July 1: the Repayment Assistance Plan and the tiered standard repayment plan.

RAP calculates a borrower’s monthly payment based on 1-10% of their adjusted gross income.

That’s different from the previous repayment plans, which set aside a portion of a borrower’s monthly expenses and calculate the monthly payment based on the lower amount.

RAP does have some new benefits, including waiving unpaid monthly interest if borrowers make their required payments.

The new tiered repayment plan will give borrowers fixed repayment terms over 10, 15, 20, or 25 years, based on the amount they borrowed.

The previous standard repayment plan is set over a 10-year repayment period, and the Education Department said the tiers are intended to give borrowers with higher balances more affordable payments by extending the repayment period.

One of the biggest disruptions will hit the roughly seven million borrowers enrolled in SAVE, the Biden-era plan that allowed for lower monthly payments and a shorter timeline for debt relief.

Trump’s administration eliminated the SAVE plan in March.

Beginning July 1, the Education Department said that servicers will start sending notices to SAVE borrowers, giving them 90 days to enroll in a new plan.

Borrowers who do not take action within their 90-day timeframe will be automatically placed in the standard or tiered repayment plan, which are the most expensive options.

Beginning July 1, graduate students and parents borrowing for children will face new federal borrowing limits.

The Education Department set a $100,000 lifetime borrowing cap for graduate students and a $200,000 lifetime cap for professional students.

While the department proposed narrowing the definition of “professional” to 11 programs, a recent court order blocked that definition from taking effect on July 1.

For now, the preexisting definition of professional, which includes advanced nursing programs, remains in place.

The parent PLUS program, which previously allowed parents to borrow up to the full cost of attendance for their kids, faces new limits, as well.

For each academic year beginning July 1, parents can borrow up to $20,000 per child, with a maximum limit of $65,000 over the course of the child’s undergraduate program.

The Education Department recently announced that borrowers who enroll in autopay will receive a 1-percentage-point interest-rate reduction beginning July 1, 2026, through June 30, 2028.

To receive the benefit, borrowers need to enroll by September, and those currently enrolled will not need to take any action.

Borrowers in default are not eligible for the reduction until they return to good standing on their balances.

Beginning July 1, the Education Department wanted to redefine “public service.” and thus limit eligibility for government and nonprofit workers to have their student debt forgiven after 10 years of qualifying payments.

However, hours before the new rule would have taken effect, a federal judge vacated the rule, calling it “unlawful.” The new definition would have excluded employers that do not align with the Trump administration’s definition of public service work, such as employers providing gender-affirming care.

District Court judge Myoung Joun wrote that this rule violates the first amendment, and is “arbitrary and capricious.” In January, the Education Department paused involuntary collections for borrowers in default, including wage garnishment and the seizure of federal benefits such as Social Security.

The department said that the pause was intended to give the administration more time to implement its student-loan repayment changes.

The department did not specify when the pause would lift.

Once it does, borrowers who have missed payments for 270 days will enter default, and they’ll face the consequences of collections.

Lawmakers and advocates have pushed to keep the pause in place while the administration implements the repayment overhaul.

Major private student-loan lenders have indicated they’re prepared for an influx of federal borrowers due to the new borrowing caps.

While private lending gives borrowers the option to shop for lower interest rates and borrow more for their education, some education policy experts and lawmakers have said that turning to private lending is risky due to minimal oversight and the lack of federal relief options.

Additionally, some schools have announced new loan programs to fill gaps in federal funding.

Washington University School of Law, for example, announced in February that it would offer a private student loan for incoming law students who “exhausted all federal loan options,” and Yale’s public health school said it would introduce a new program that would offer “comparable, if not more competitive” loan terms compared to the federal ones.

Ongoing litigation surrounding the department’s borrowing caps casts uncertainty on what funding will look like for advanced degrees and on whether more students would turn to private lending.

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Contact this reporter at asheffey@businessinsider.com.