New federal student loan regulations are slated to take effect on July 1, 2026, and while many of the headlines have focused on changes for graduate and professional students, undergraduate students and their families will feel the effects too. Here's a breakdown of what's changing and what it will mean for students navigating college today.
The US Department of Education's final rule, Reimagining and Improving Student Education" (RISE), implements the statutory changes included in the budget reconciliation bill, which was signed into law on July 4, 2025. The regulations touch nearly every aspect of the federal student loan system: borrowing limits, repayment plans, loan rehabilitation, and deferment and forbearance eligibility. Some changes are good news for students. Others will require careful planning.
What Hasn't Changed: Undergraduate Loan Limits
The most important piece of news for current and future undergraduates is what the rule doesn't change: annual Direct Stafford Loan limits. Dependent undergraduates can still borrow up to $5,500 as freshmen, $6,500 as sophomores, and $7,500 as juniors and seniors. Independent students retain their higher limits as well.
The aggregate loan picture is more complicated. A new lifetime borrowing cap of $257,500 applies across all federal student loan programs. For most undergraduates, this won't be a constraint, but it will matter if they go to graduate or professional school. Students with aspirations toward law, medicine, or doctoral programs should be aware that this cap now covers their entire federal borrowing career, from their first year of college through a PhD or JD.
Student Loans Prorated for Part-Time Students
One of the most consequential changes for undergraduates is the new rule reducing loan amounts for students enrolled less than full-time. Under the new rule, annual loan limits will be scaled down proportionally when a student is not enrolled full-time. For example, a student attending half-time will now be eligible for half of the annual loan amount. Students with caregiving or other responsibilities who cannot easily scale up paid employment may struggle to make meet their bills. Rent, obviously, not be prorated and those fixed costs may prove challenging for low-income students. College access advisors should be prepared to counsel part-time students on what this change will mean for them.
Parents' Borrowing Power for College Will Be Capped
For dependent undergraduates whose families rely on Parent PLUS Loans to cover the cost of attendance, the rules limit how much parents can borrow to $20,000 annually and $65,000 total, per dependent student.
It’s worth noting that Parent PLUS loans will not count towards the student’s lifetime borrowing limit of $257,000 that was referenced above, but they may force some students to rachet down their ambitions, attend less expensive schools, and/or take on more debt.
Student Loan Repayment Changes
For undergraduates who will be repaying loans in the years ahead, the repayment landscape is being fundamentally restructured. Several existing plans are being eliminated:
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Income-Contingent Repayment (ICR) is being phased out.
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Pay As You Earn (PAYE) is ending.
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SAVE, which is in a bit of legal limbo, is being sunset.
In their place, borrowers will have access to two new options:
The Tiered Standard Repayment Plan offers fixed monthly payments over a 10-to-25-year term, with a structure that varies based on total debt level. This is the plan new borrowers will be defaulted into.
The Repayment Assistance Plan (RAP) is the new income-driven repayment option. The Department emphasizes that RAP is designed to prevent negative amortization — meaning borrowers’ balances won't grow beyond their original loan amount even if their income-based payment doesn't cover all the interest. For low-income borrowers early in their careers, this is a meaningful protection. RAP also qualifies borrowers for Public Service Loan Forgiveness (PSLF), which matters for undergraduates who pursue careers in government, education, or nonprofit work, such as being college access advisors.
Borrowers with existing loans originated before July 1, 2026, may retain access to certain legacy plans during a transition period, but the income-based repayment landscape will be significantly narrower going forward.
What Students Should Do Now to Prepare for Student Loan Changes
With the July 1 effective date approaching, undergraduate students, with support from the advisors who serve them, should:
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Learn their loan balance. Log into studentaid.gov to review current federal loan totals and understand how they fit within the new lifetime cap. Review this information with their parents if they have taken out Parent PLUS loans or plan to in the future.
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Part-time students should plan ahead. Talk with financial aid offices about how students' enrollment status will affect their 2026–27 student aid package.
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Understand the new repayment plans. Learn how RAP and the Standard plan work before entering repayment.
The new rules represent the most significant changes to the federal student loan system in years and the impact on students will vary depending on their enrollment status, their family's financial situation, and the career path they wish to pursue. College advisors have an important role to play in helping students understand these changes. As always, please reach out with any questions to [email protected].