What to know ahead of the July 1 student loan shakeup

Borrowers face substantial changes to student loans beginning next month, including fewer repayment options under President Trump's tax-and-spending law and the final death blow for the dismantled SAVE plan.

Why it matters: Millions of borrowers must pick a new repayment plan, and some will face tighter borrowing caps and higher repayments.

Here are some of the biggest July 1 changes:

Sayonara, SAVE Plan:

After years of legal limbo and paused repayments, SAVE Plan borrowers will now receive notices to enroll in a different repayment plan within 90 days.

• If a borrower doesn't do so, they'll be automatically enrolled in the standard repayment plan.

Those who have to switch repayment plans but don't expect to take out any new federal loans retain more options than those still borrowing.

• But keep in mind: Both the Income-Contingent Repayment (ICR) plan and Pay As You Earn (PAYE) plan will be phased out by July 1, 2028.

New repayment plans:

The One, Big, Beautiful Bill Act created a new Tiered Standard repayment plan and a new income-driven plan, the Repayment Assistance Plan.

• New borrowers will be left with just those two repayment options.
• "This is quite a phased transition," says Sarah Austin, a policy analyst at the National Association of Student Financial Aid Administrators.
• "Right now, we have like half a dozen different repayment plans. We now have these two new ones, but ... eventually we're going to get streamlined down to just the two," she explains to Axios.

The fine print: The Tiered Standard Plan offers fixed monthly payments to repay a loan in full within a minimum of 10 years or a maximum of 25 years, depending on the amount borrowed.

Meanwhile, under the Repayment Assistance Plan, monthly payments are based on income and the number of dependents.

• So, the more you make, the more you'll pay per month. The income brackets that determine the monthly payment are not indexed to inflation.
• While other IDR plans had a cap on monthly payments, RAP does not. No- to low-income borrowers must pay $10 per month.
• One positive for the RAP plan, according to some student loan experts, is an interest subsidy for borrowers whose full, on-time payments are less than the interest accrued after the prior due date.

Parent PLUS changes:

One group hit hardest is parent PLUS borrowers, says Betsy Mayotte, the president and founder of The Institute of Student Loan Advisors.

• New Parent PLUS loans for parents of dependent students from July 1 must be repaid under the new tiered standard plan, without options for an income-driven plan.
• If existing borrowers didn't consolidate in time, they're left with far fewer options.
• "It's heartbreaking ... we're getting emails from Parent Plus borrowers almost every day, saying, 'I borrowed this much, my income is this much, I was anticipating being able to use an income-driven plan,'" she says. "And now, it's too late."

The OBBBA also put new caps on parent PLUS loans: $20,000 per year and a $65,000 total cap per dependent.

New borrowing limits:

Graduate students are also set to see changes to borrowing limits under the OBBBA — though an ongoing legal challenge may complicate things.

• Prior loans that allowed graduate or "professional" students to borrow up to their full cost of attendance (beyond what federal direct loans covered) are being eliminated.
• Plus, grad students will face strict borrowing ceilings for unsubsidized loans: $20,500 annually and a lifetime cap of $100,000. Some existing borrowers will still be eligible under the old rules as they complete their current programs.
• Austin tells Axios that if students' programs are more expensive than those limits, they may turn to private loans. But "private loans are riskier" and don't have as many federal protections, she says. Plus, not all students will qualify.

Professional students, however — those pursuing select fields of study, including pharmacy, dentistry and law — have an elevated cap of $50,000 a year and $200,000 total.

What we're watching: A federal judge recently halted the administration's implementation of the regulatory definition of a "professional degree."

What borrowers can do:

Borrowers should review their repayment plan options, and families and students may need to reconsider their financial strategies.

• Of course, the best option depends on each borrower's scenario. Check out Federal Student Aid's situational illustrations here. NASFAA also has a number of helpful visuals to navigate the student loan wilderness.

Go deeper: Trump's student loan limits could rock the health care industry