For students who have taken out loans or plan to, President Donald Trump’s “One Big Beautiful Bill” – which he signed late last month – could have drastic effects.
From restricting how much people can borrow to completely eliminating repayment plan options, the bill will be widely felt, according to Michael Dannenberg, deputy commissioner for policy at the Massachusetts Department of Higher Education.
“President Trump’s new law makes higher education more expensive and riskier for those who either have borrowed or have to borrow. Both are affected,” Dannenberg said.
There are over 900,000 current borrowers in Massachusetts and each year about 150,000 undergraduates who are attending colleges in Massachusetts borrow to pay for school, he said.
What are the new repayment plans?
The law allows for two repayment plans. The first is a standard plan for people who can pay off the loans entirely in 10 to 25 years with fixed monthly payments. The length of time is based on the amount borrowed, with more time allowed for larger amounts.
The other is a repayment assistance plan that allows for loan forgiveness after 30 years of payments – far longer than the 20 to 25 years of most current plans.
In contrast to prior years, when borrowers had access to several repayment plans, new borrowers will only have access to the above two plans beginning on or after July 1, 2026.
Popular income-driven student loan repayment options – including ICR, PAYE and SAVE – will be eliminated.
What if you are part of a plan that is being eliminated?
All borrowers who took out a loan prior to the July 2026 deadline will be able to continue using their standard, graduated, income-based and extended repayment plans, according to Mark Kantrowitz, a financial aid expert.
However, borrowers who are a part of ICR, PAYE or SAVE will eventually have to choose a different plan, he said.
The change will likely result in higher monthly payments, Dannenberg said.
The U.S. Department of Education announced last month that borrowers under the SAVE plan will see accruing interest resume on Aug. 1.
A typical borrower affected by the restart of student loan interest will experience more than $3,500 in “unnecessary interest charges” per year or $300 per month, according to estimates from the Student Borrower Protection Center.
The new law will create, in sum, more than $27 billion in unnecessary costs to working families with students in the next year, the center said.
The Trump administration is reaching out to the nearly 8 million borrowers enrolled in the SAVE plan on how to move to a different repayment plan.
The U.S. Department of Education is suggesting that borrowers consider enrolling in the income-based repayment plan until the department can launch the repayment assistance plan.
However, switching plans right now will be difficult at a time when the U.S. Department of Education has a backlog in processing forms, Kantrowitz said.
“They say they’re working toward clearing that backlog, but it’s not clear how long that’s going to take,” he said.
How are parent borrowers affected?
The Parent PLUS loan program, which allows parents of undergraduate students to take out loans for educational expenses, is being capped at $65,000 total per student or a $20,000 annual limit.
Families previously could borrow up to the cost of attendance.
Parents who take out Parent PLUS loans after July 2026 won’t have access to any income-driven repayment programs or public service loan forgiveness.
Parent PLUS borrowers can consolidate their loans and enroll in an income-contingent repayment plan, but need to do so before June 30, 2026.
There are new limits on what you can borrow for graduate school.
As part of the bill, beginning July 1, 2026, the federal Graduate PLUS loan program will be eliminated, which helps graduate or professional students fund their education.
The bill also sets a new $100,000 total limit or $20,500 per year for how much graduate students can borrow.
Law and medical students now have a cap of $200,000 total that they are able to borrow or $50,000 per year.
What happens after you hit your borrowing limit?
While the intended impact of Congress is to create “downward pressure” to have institutions reduce their cost of attendance and to bring down the federal student loan debt, it may not have that effect, according to Emmanual Guillory, senior director of government relations at the American Council on Education.
Unless institutions actually change their pricing, what will likely happen is that people will have to substitute federal loans with private loans.
Once borrowers hit the ceiling for what they can borrow from the federal government, they can pursue loans in the private market – which are more expensive and riskier because they have fewer protections – they can choose not to go to school or they can alter where to pursue school, Dannenberg said.
Private markets require the borrowers to have some kind of credit history, which could also alienate lower-income borrowers.
“Whereas the Healey-Driscoll administration has been making college more affordable, the new law that passed at the federal level in general is going to make higher education more expensive and riskier for the middle class, in particular, student loan borrowers,” Dannenberg said.
“And that is going to affect decision making and everything from whether to further pursue your education to where to pursue your post-secondary education,” he said.
Choosing different schools based on costs
On top of moving to a private loan market, students may shift from higher-cost colleges to lower-cost ones, such as public colleges, according to Kantrowitz.
“We’re going to probably see some shift in enrollment patterns influenced by ability to borrow,” he said.
Dannenberg pointed out that state financial aid programs are generally grant programs and don’t often deal with student loans.
What happened to student loan forgiveness?
Student loans forgiven on or after Jan. 1, 2026, as part of income-based repayment, will be taxed, Dannenberg said.
This is because a provision set to expire on Dec. 31 – which made most student loan forgiveness tax-free – wasn’t extended.
Public Service Loan Forgiveness, which cancels the student loans of government employees such as firefighters or teachers after 10 years of payments, has also been restricted.
An executive order that President Trump signed in March states that people working for certain organizations that previously had qualified for inclusion in the program would be restricted based on those organizations’ support of a broad set of criteria the order deemed “activities that have a substantial illegal purpose.”
Advocates fear it would be used to go after certain organizations that don’t align with the federal government.
Expansion of college savings plans
While the bill changes a lot for borrowers, it also works to expand what is called a “529 plan.”
A “529 plan” is an investment account that is tax-free when used for college and college-related expenses and K-12 education.
Among the changes to the 529 plans is moving the cap of $10,000 annually for K-12 tuition to $20,000 and adding additional uses, Kantrowitz said.
The set of qualified expenses for 529 plans will now also include not just savings for tuition and fees but also book supplies and equipment, tutoring and standardized test fees, among other options, he said.
Workforce education programs and post-secondary credentialing expenses will also be a part of the 529 plan.
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