New student loan rules take effect July 1. Here's what borrowers should know.

New student loan rules take effect July 1. Here's what borrowers should know.

Major changes to federal student loan rules take effect on Wednesday, July 1, that will limit how much Americans can borrow and their repayment options.

The overhaul, made under the 2025 "One Big Beautiful Bill Act," will affect millions of people who take out loans to finance their education.

"These are the most changes we have seen at this scale in a very long time," said Sarah Austin, a policy analyst at the National Association of Student Financial Aid Administrators, a nonprofit membership organization.

The U.S. Department of Education described the overhaul as a way to streamline the student loan system, which currently consists of seven repayment plans, and rein in student loan debt, which stands at almost $1.9 trillion.

Borrowers enrolled in the Biden-era Saving on a Valuable Education, or SAVE, plan are among those affected as the Trump administration moves to wind down the program and shift borrowers into new repayment options. Loan payments for the roughly 7.2 million people enrolled in SAVE have been on pause for two years as a legal battle over the program's fate played out.

Beginning July 1, borrowers who take out a new federal student loan will have only two repayment options: the Tiered Standard Plan and a new income-driven repayment plan called the Repayment Assistance Plan, or RAP.

Loan servicers are expected to begin notifying SAVE borrowers on or around July 1 that they must select a new repayment option within 90 days. "If they do nothing in that 90-day period, then the loan servicer will automatically put them in the standard plan," Austin said.