On July 4, President Donald Trump signed the Big Beautiful Bill into law, finishing off a months-long partisan battle over one of the most sweeping federal spending laws in recent history.
First introduced by Rep. Jodey Arrington of Texas on May 20, the nearly 1,000-page bill is packed with tax cuts, spending rollbacks, and major reforms to federal benefit programs. Backed by the majority of Republicans as a bold step toward balancing the federal budget and curbing government overreach, the legislation includes steep cuts to Medicaid, the Supplemental Nutrition Assistance Program (SNAP), and housing subsidies. It also lifts caps on state and local tax (SALT) deductions — a change that disproportionately benefits wealthier households.
Democrats fiercely opposed the bill, warning that it would deepen inequality and push millions of low-income Americans further into financial precarity. But despite protests and heated debate on Capitol Hill, the Republican-led House passed the bill on July 3. One day later, it became law with Trump’s signature.
The new law touches nearly every aspect of American life — from healthcare and housing to food assistance and tax policy — and yes, this even includes student loans. So how exactly will this affect students and borrowers? Here are four ways the Big Beautiful Bill is affecting student loans.
Elimination Of Grad PLUS program
Graduate students have traditionally used Direct PLUS Loans to help finance costly programs like medical or dental school, as these federal loans do not have borrowing limits. However, the new law will eliminate the Grad Plus program, which may force students to rely on private lenders. Since private loans typically have stricter credit requirements, this change could create financial barriers for many graduate students. The elimination of the program could lead to fewer students pursuing graduate education due to limited financial options.
Parent Plus Loans Limits
The law sets a $20,000 annual borrowing limit and a $65,000 lifetime cap per child for Parent PLUS loans. It also introduces overall borrowing limits to prevent excessive debt accumulation by parents. These limits could make it harder for families — especially those without significant savings — to fully cover college costs, particularly at private or out-of-state schools. This as well could cause financial burden onto students, who may need to take out additional loans in their own names or work more hours to cover the gap. This could lead to higher student debt and increased financial stress during school.
Changes To Repayment Plans
A major change the new law brings involves streamlining federal student loan repayment options. Starting July 1, 2026, new borrowers will have only two choices: a Standard Repayment Plan with fixed monthly payments based on the total amount borrowed, or a Repayment Assistance Plan (RAP) that simplifies and replaces existing income-driven repayment programs. Current income-driven plans like Income-Based Repayment (IBR) and Pay-As-You-Earn (PAYE) will be phased out, and borrowers enrolled in those plans will need to transition to one of the new repayment options by July 1, 2028. For borrowers, this means they’ll have to choose between a fixed-payment plan or the new RAP, which may not be as flexible or affordable for all income levels, especially those relying on current income-driven protection plans.
Pell Grant Program Updates
The bill also targets the Pell Grant program, a key source of college access for low-income students. Under the bill, Pell Grants will only be available to students whose financial aid covers the full cost of attendance for full-time students. This change would primarily impact low-income students, especially those whose financial aid does not fully cover the cost of attendance. It could also affect colleges that rely on Pell Grants to supplement full-ride scholarships, potentially limiting access for part-time, non-traditional, or financially needy students.
When will these changes start?
Student loan changes will take effect July 2026 or later. Loan borrowers will have a two-year window — until July 1, 2028 — to decide whether to transition to the revised IBR plan or opt into the new RAP option. So, if you’re stressing about how this new law is going to affect your college experience, your finances, or all of the above, try not to stress — you have a bit of time to figure things out.