Trump's Student Loan Overhaul: What You Must Do Before July 2026

The Trump administration has unveiled one of the most sweeping reforms of the federal student loan system in decades.

From July 2026, existing repayment options will be scrapped, borrowing caps will be introduced, and a new repayment assistance plan will be rolled out—moves that could reshape higher education financing for millions of Americans.

New Repayment Plans: What Will Change

The US Department of Education plans to replace the current suite of income-driven repayment (IDR) programmes with just two choices: a standard repayment plan and a Repayment Assistance Plan (RAP).

• The standard plan calculates monthly payments based on the total balance and fixed interest rates.
• The RAP will base payments on discretionary income, ranging from 1% to 10%, with a minimum payment of $10 (£7.46).

The RAP includes provisions to waive unpaid interest and cancel loans after 30 years; however, critics warn that it risks trapping low-income borrowers in extended debt. Borrowers who take out loans before 1 July 2026 can remain on existing IDR plans; those borrowing after must choose from the new system.

According to Business Insider, these changes are part of the administration's broader effort to simplify repayment options and reduce long-term federal liabilities.

Borrowers who take out loans before 1 July 2026 will retain access to existing IDR plans, while those who borrow after that date will be limited to the new RAP and standard repayment options.

Graduate Borrowing Caps and Programme Cuts

A major flashpoint is the elimination of the Grad PLUS loan programme, which currently allows graduate and professional students to borrow up to the full cost of attendance. Under the new framework:

• Graduate students will face caps of $20,500 (£15,300) annually and $100,000 (£74,600) lifetime.
• Professional students in high-cost fields, such as medicine, dentistry, and veterinary studies, will be capped at $50,000 (£37,300) annually and $200,000 (£149,200) for their lifetime.

Doctorates in education and similar programmes may not qualify for the higher limits, leaving many students to seek private loans or reconsider enrolment.

The Department of Education has suggested that only degrees requiring 'a level of professional skill beyond that usually required for a bachelor's degree' will qualify for the higher caps.

Examples cited include pharmacy, dentistry, and veterinary medicine, while other fields, such as education doctorates, may not be included. As Brussels Morning reports, this could force students in high-cost programmes to seek private loans or reconsider enrolment altogether.

Timeline and Implementation

The reforms are being developed through a negotiated rulemaking process, which includes stakeholder input and public comment periods. The administration aims to finalise the rules and implement them by 1 July 2026. This timeline is considered ambitious, given the complexity of the changes and the need for regulatory clarity.

Borrowers are advised to monitor updates from the Department of Education and consult financial aid offices to understand how the changes may affect their repayment options. As NerdWallet notes, the RAP could offer relief for some, but may also extend debt burdens for others depending on income levels and loan amounts.

What Borrowers Should Do Now

With the July 2026 deadline looming, current and prospective borrowers should take proactive steps to protect their financial future:

• Review your loan type and repayment plan: If you're currently enrolled in an IDR plan, confirm whether your loans were disbursed before the cut-off date.
• Consider accelerating borrowing: Students planning to pursue graduate or professional degrees may want to secure funding before the new caps take effect.
• Seek financial counselling: Universities and non-profit organisations offer resources to help borrowers navigate repayment options and avoid costly mistakes.
• Stay informed: Follow updates from the Federal Student Aid website and reputable news outlets for the latest developments.

While the reforms aim to streamline repayment and reduce government exposure to student debt, they also raise serious questions about affordability and access to higher education.

Broader Implications

The reforms mark one of the most significant shifts in federal higher education policy in years. Supporters argue the overhaul will simplify repayment and reduce long-term liabilities for the government. Critics counter that it threatens affordability and could exclude low- and middle-income students from pursuing advanced degrees.

As the July 2026 deadline approaches, borrowers face a critical period of adjustment. Decisions made now will determine how affordable higher education remains for future generations.