The Department of Education (ED) just announced final rules that reshape the federal student loan program, including new borrowing limits and major changes to repayment options. More on that and other essentials this month:

• For students and families: New federal borrowing limits begin in July, reshaping how families cover funding gaps, alongside FAFSA and Pell developments and key considerations amidst major college decisions.
• For student loans in or entering repayment: Updated timelines for default collections and new tools to rehabilitate, the latest forgiveness and processing updates, recent FSA account issues, and worsening scams. Plus reminders: SAVE borrowers risk being moved to Standard repayment and Parent PLUS borrowers are running out of time.

---

Student Loan Default: Notices From Treasury Expected in July

If you’re in default:

• Treasury may start contacting you starting July. 
• Aggressive collections (wage garnishment, tax refund seizure, benefit offsets) are expected to resume in the near future. 
• Serious credit damage related to delinquency & default continues to occur. 
• Getting out of default can take 2–9 months depending on whether you choose consolidation or rehabilitation—starting early matters.

If you’re not sure of your status: Check StudentAid.gov.

👉 Learn more about Preventing or Getting Out of Default

---

Forgiveness & Payment Tracking Updates

• In April, ED announced more than 21,000 borrowers will receive forgiveness under currently available IDR plans. If you’ve made 20–25 years of qualifying payments, watch for a discharge notice.
• ED also said it will bring back the IDR forgiveness payment tracker (no timeline yet).

Processing reality check:

• About 554,000 borrowers are still waiting for repayment plan requests to be processed.
• Using the online IDR application and allowing IRS data access can significantly speed up processing.

PSLF:

• PSLF buyback still has no estimated timeline.

• Regular PSLF processing continues. Keep submitting Employment Certification Forms each year and maintain your records.

---

Account Glitches + Scam Risk: Protect Yourself

Account monitoring:

• Some borrowers reported Parent PLUS loans appearing under the student’s account (even forgiven ones). Federal Student Aid (FSA) is aware and working to fix it.
• Expect more system changes and potential glitches as new aid/loan rules roll out.
• Monitor StudentAid.gov and your servicer portal. Report major issues promptly.

Scam warning amidst rising risks and confusion:

• You should never have to pay for student loan help.

• Red flags: “enroll now/today” pressure, “guaranteed forgiveness,” requests for your FSA password, or demands for upfront fees.

---

New Repayment Rules Take Effect July 1

• The Repayment Assistance Plan (RAP) becomes available.
  • Payments are based on a percentage of income.
  • For new borrowers, the timeline to loan forgiveness extends from 20 to 30 years.
• Loans disbursed before July 1, 2026 will still be eligible for all existing IDR plans until July 1, 2028.
  • After this date, PAYE and ICR will sunset. IBR will remain an option.
• Loans for students disbursed on or after July 1, 2026 will only be eligible for Standard Repayment and the new RAP plan.

👉 Compare estimated payments and forgiveness timelines across all plans with our Repayment Plan Calculator.

• July 1, 2027: New limits take effect on deferments and forbearances
  • Loans disbursed on/after this date are not eligible for economic hardship or unemployment deferments.
  • Forbearance is capped at 9 months within any 24‑month period for loans disbursed on/after this date. 
  • Borrowers may rehabilitate defaulted loans twice (up from once).

👉 Learn more about all the new rules and get the full timeline of changes. 

---

SAVE: Notices start July 1 — then you have 90 days to choose

Starting July 1, servicers will notify SAVE borrowers of their specific SAVE forbearance end date. After you receive your notice, you’ll have 90 days to select a new plan.

Key points:

• Not everyone may receive notices at the same time; notifications may be staggered.
• If you don’t choose a plan by your deadline, you’ll be placed into a Standard plan. That usually means higher payments and no forgiveness credit.
• Interest continues to accrue in SAVE forbearance.
• Time in SAVE forbearance does not count toward IDR or PSLF forgiveness progress.
• The earliest anyone is expected to be forced out is the end of September.

What to do now (choose what fits your situation):

Ready to switch plans? 

• Go to studentaid.gov/idr and select “Recertify or Change your IDR Plan.”
• Complete the application—only submit when you’re ready.
• If you use IRS data retrieval, you’ll be able to see your payment options. Your payments will be based on your most recent tax filing.
• You’ll receive a 60‑day processing forbearance, which counts towards forgiveness. 
• Interest does not capitalize.

Waiting for RAP? Applications open July 1—stay in SAVE until then if that’s your plan.

👉 Compare estimated payments and forgiveness timelines across all plans with our Repayment Plan Calculator.

---

Parent PLUS: Urgent Action Required Now

Reminder for Parent PLUS borrowers who do not plan to take out new loans on or after July 1, 2026 and want to preserve access to IDR and forgiveness options:

• You must consolidate your Parent Plus loans ASAP because your consolidation must be fully disbursed by June 30, 2026.
• Consolidations typically take 4–6 weeks to disburse. 

👉 Learn more.

---

New Borrowing Limits Start in July: Plan for Funding Gaps Carefully

New federal loan limits may leave some students and families needing to cover more costs:

• Parent PLUS loans will be capped at $20,500 per year/$65,000 per student limit, and new loans won’t qualify for Income‑Driven Repayment (IDR) or forgiveness.
• Graduate PLUS loans are being eliminated.
• Graduate Direct Unsubsidized loans will be capped at about $20,500 per year/$100,000 aggregate limit.
• Professional students (e.g., medical, law) will have higher annual caps of $50,000 per year/$200,000 aggregate limit.
• Important: Prior Plus loans will count towards the new cap even if they were repaid or forgiven. 

If you may be affected, review your borrowing plan early and be cautious about private loans, which don’t offer federal protections like Income‑Driven Repayment or loan forgiveness.

👉 Get all the details on the new caps by loan/degree type on How Student Aid is Changing starting July, 2026.

---

FAFSA Update and Financial Aid Considerations for College Decisions

FAFSA identity checks:

• You may see real‑time identity verification steps to prevent fraud (ID upload, sometimes on‑camera photo verification). Apply early and be prepared.

Pell and other supports:

• ED’s budget proposal for the next fiscal year would maintain the max Pell Grant at $7,395 and cover the program’s short‑term gap, but holding Pell flat still reduces purchasing power over time as costs rise.
• Bigger risk: the proposal protects Pell while cutting other supports, including eliminating FSEOG, cutting Work‑Study, and eliminating TRIO, GEAR UP, and FIPSE—programs that help low‑income and first‑gen students.

When reviewing aid offers:

• Separate grants/scholarships from loans—don’t let categories blur.
• Check renewal rules (GPA requirements, whether awards last all four years).
• Appeal if your financial situation changed or you have a stronger offer elsewhere.
• Watch for scholarship displacement policies.
• Big savings still come from in‑state options and commuting from home.

👉 Get more guidance and free tools for Understanding & Comparing Financial Aid Award Letters