Federal student loans are undergoing a series of changes this summer. Millions of SAVE borrowers must find new repayment plans in the coming months. Limits on federal loans for graduate students and parents could push many to private lenders. New repayment plans are replacing old ones, potentially resulting in higher monthly payments.
It can be difficult to keep track of all the changes taking place, and there may be some new rules you haven’t heard about. We’ve put together a full checklist of what you may need to do to avoid student loan surprises.
Here are five additional federal student loan changes that could sneak up on borrowers.
Auto Pay Shaves Your Interest Rate by 1 Percentage Point
About 40% of federal student loan borrowers are enrolled in auto pay, according to the Education Department. The Trump administration would like to see that number increase.
That’s why it announced in June that you can earn a full percentage point reduction on your interest rate if you set up automatic monthly payments on your loans.
Borrowers already receive a 0.25-point rate cut for enrolling in auto pay, an optional feature that allows servicers to deduct payments from a person’s checking or savings account each month. The latest update trims your rate by an additional 0.75 of a point. The new reduction, which goes into effect on July 1, is available to all students and parents with federal Direct loans that were distributed on or after July 1, 2012. Those already enrolled in auto pay will automatically benefit from the additional cut without taking any action. The rate cut remains in effect through 2028.
The reduction will likely have the biggest impact on borrowers in a standard repayment plan, where interest rates determine your monthly payment. For example, if you have $50,000 in student loans at an 8% rate on a 10-year repayment plan, your monthly payment would be $607. By reducing that rate to 7%, your monthly payment would drop to about $581.
The lower rate won’t directly affect the monthly payment amounts for those on income-based repayment plans, since those payments are determined by your income. However, it would decrease the amount of interest that might accrue on an income-driven borrower’s balance.
Interest rates on federal student loans are just shy of their highest mark in more than a decade, with the 2026-27 undergraduate rate at 6.52%. Graduate students face an 8.07% rate, while Parent and Grad PLUS loans come with a rate of 9.07%.
[Read: Best Private Student Loans.]
Parents Lose Affordable Repayment Option
The federal student loan overhaul wasn’t particularly generous to parent borrowers, who were handed stricter borrowing limits and less flexibility.
New parent borrowers lose significant benefits that most other student loan borrowers still enjoy.
In previous years, borrowers who took out Parent PLUS loans to pay for their student’s college could gain access to more flexible and affordable income-driven repayment plans by consolidating their loans. But starting July 1, 2026, new PLUS loans can only be repaid under the tiered standard plan, which doesn’t offer forgiveness or lower payments based on income. Instead, that plan requires full repayment over a period of 10 to 25 years depending on the total balance of the loans.
Parent PLUS loans have relatively high interest rates, which increased to 9.07% for the 2026-27 academic year. As with other federal student loans, any parent borrower can qualify for PLUS loans as long as they don’t have an adverse credit history.
The high interest rate, low qualification bar and lack of an affordable repayment option concerns Betsy Mayotte, president and founder of The Institute of Student Loan Advisors.
“I fully expect default rates to shoot up over the next 10 years for Parent PLUS borrowers unless Congress goes back and fixes that and gives them lower payment options again, or makes the credit criteria for them similar to private,” Mayotte says.
Roughly 600,000 parents take out PLUS loans each year, generally accounting for less than 10% of student loan borrowers.
[Read: Best Parent Student Loans: Parent PLUS and Private.]
Your New Student Loan Could Make Your Old One More Expensive
Borrowers with an existing federal student loan should be aware of this potential tripping hazard.
You may know that if you take out a new federal student loan on or after July 1, 2026, that loan must be repaid under one of the two new plans: the income-driven Repayment Assistance Plan or the tiered standard plan. However, once you begin repayment on that new loan, any existing loans you have must also be repaid under a new plan.
This could have a significant financial impact on several types of borrowers. For example, say you’re currently paying off loans in the legacy Income-Based Repayment plan and you’re on track to get your balance forgiven after 20 years. If you take out a new loan, you forfeit your eligibility for that IBR plan, and you’d have to instead move those existing loans to RAP. Because RAP only forgives loans after 30 years, you’ve now extended your forgiveness window and added 10 years of payments. Depending on your income, RAP may also increase your monthly payments.
Some parent borrowers could see an even larger impact. Consider a parent who took out federal loans for their first child and consolidated them to access an income-based repayment option. If that parent now wants to borrow new loans for a second student, all of their loans would be bumped into the tiered standard plan, likely meaning a spike in monthly payments and no flexible repayment options or forgiveness path.
Some parents may be able to avoid that scenario by having the other parent or guardian take out the new loan, or by borrowing through a private student lender instead.
[Read: Best Student Loan Refinance Lenders.]
If You Attend Part Time, Your Loan Limit Is Now Prorated
In the past, undergraduate and graduate borrowers could take out up to the full loan limit each year as long as they attended school at least half time.
Starting on July 1, part-time students will have their borrowing limits prorated based on the number of credits they take. It could potentially cause some students to hit their annual borrowing caps earlier and delay their completion timeline.
“That’s something that has never happened before in the federal loan program,” says Jordan Matsudaira, a professor of economics and public policy at American University and the co-director of the PEER Center, a research hub based at the university. “I think this is going to be a really big shock for a lot of grad students who do attend part time.”
While the change could impact a wide range of students, Matsudaira notes that it may be felt more heavily in certain fields where part-time study is more common, such as nursing.
About 800,000 students who took out federal loans in 2025 attended less than full time, according to Department of Education data.
Colleges Can Set Lower Loan Caps if They Want
Some colleges have argued in the past that they should be given the flexibility to set lower loan limits for certain programs at their discretion, rather than be forced to adhere to the maximum federal limits. They’ll have that option now.
For example, if a university believes federal loan limits are too high for a specific program and it’s concerned about a rise in default rates, it could choose to cap loans for all students in that particular program at a lower level than the federal ceiling.
An institution must notify current and prospective students to any loan limit reductions and explain the reason for the cap.
Colleges can lose access to federal aid due to high default rates, which could be a motivating factor for some to act. Community colleges, for example, are often heavily dependent on Pell Grants, and some might be willing to lower borrowing limits to reduce the likelihood of defaults and the potential loss of grants.
“I’ve always been a little bit skeptical that they really want to go lower than the federal limits,” says Matsudaira. “But I think it will be interesting to see if there will be any takers for that new flexibility.”
More from U.S. News
Federal Student Loan Changes Are Almost Here. Here’s Every Step You Should Take After July 1
Is Now a Good Time to Refinance Your Student Loans?
Why Student Loan Caps Could Lead to a Rise in Mid-Degree Dropouts
5 Under-the-Radar Student Loan Changes You Should Know About originally appeared on usnews.com
