Changes to student loans are taking effect July 1. Here's what to know

Changes to student loans are taking effect July 1. Here's what to know

NEW YORK (AP) - Changes to federal student loans expected to affect millions of borrowers are taking effect July 1. A part of President Donald Trump's "Big Beautiful Bill," these changes mean the end of some payment plans and new limits for graduate loans.

Along with the end of the Biden-era SAVE plan, the changes are expected to raise the cost of payments for millions of borrowers.

"The main concern is the affordability of monthly payments. I think a lot of people are simply going to see their payment increase significantly and they're either going to have to stretch pretty significantly to make that payment work or they're not going to be able to make the payment," said Michele Zampini, an associate vice president at The Institute for College Access & Success.

Around 9 million Americans are in default on their federal student loans as of June, according to the Education Department.

Earlier this month, Education Department officials said borrowers who are enrolled in auto pay will be eligible for a 1% rate reduction beginning July 1. However, borrowers who currently use auto pay already receive an interest-rate discount of 0.25%, so the new reduction takes off just 0.75%. For all borrowers, the rate reduction will be temporary, lasting through June 2028.

The SAVE plan was a repayment option with some of the most lenient terms ever offered by the government. Soon after its launch it was challenged in court, leaving millions of student loan borrowers in limbo. Earlier this year, the U.S. Court of Appeals for the 8th Circuit struck down the SAVE plan, which ended Wednesday.

There are about seven and a half million borrowers in the SAVE plan and servicers will begin sending them official notices Wednesday, said Lindsay Vail Clark, chief borrower advocate at Savi, a student loan debt assistance platform.