Trump Is Kicking Off Major Changes to Student-Loan Repayment

The process to overhaul student-loan repayment is officially underway.

On Monday, President Donald Trump’s Department of Education is beginning negotiations with stakeholders on the president’s plans to change student-loan repayment options and place new caps on borrowing.

The changes stem from Trump’s “big beautiful” spending law. They’re required to undergo the negotiated rulemaking process — which includes stakeholder feedback and periods of public comment — before moving forward with final implementation. It’s typically a lengthy process, and the administration will have to move quickly to meet its previously defined goal of July 2026 as the deadline to implement many of the changes.

A draft version of the negotiations agenda said that the topics will center on new loan limits, income-driven repayment plans, and changes to deferment and forbearance periods.

Here’s how the Department of Education plans to roll out its student-loan repayment changes.

New student-loan repayment plans

A key topic at the negotiation sessions is Trump’s plan to eliminate existing income-driven repayment plans and replace them with two new plans to be implemented next summer.

The first plan is a standard repayment. According to the department’s proposed text, this plan would set a borrower’s monthly payment based on the amount of their direct federal loans and the interest rates. The second plan is a new Repayment Assistance Plan, which sets borrowers’ monthly payments at 1% to 10% of their discretionary income, based on their income levels, with a $10 minimum payment. The plan waives unpaid interest and allows for forgiveness of remaining balances after 30 years.

The department plans to implement these plans by July 1, 2026. Its draft proposal said that borrowers who took out loans before that date will retain access to standard repayment and income-based repayment plans, while borrowers who take out loans after that date can enroll in the Repayment Assistance Plan.

New caps on borrowing

The department is proposing to eliminate the Grad PLUS loan program on or after July 1, 2026. This program allows graduate and professional students to borrow up to the full cost of attendance for their programs. The changes would result in a cap on borrowing for graduate students at $20,500 a year and $100,000 over a lifetime, and for professional students at $50,000 a year and $200,000 over a lifetime.

The department’s draft proposal also suggests refining definitions for graduate and professional students. It said that a professional degree is one that shows “a level of professional skill beyond that normally required for a bachelor’s degree.” It cites pharmacy, dentistry, and veterinary medicine as examples of degrees that would meet the qualifications.

While the list of examples is not exhaustive, degrees not focused on medicine, like an education doctorate, were not referenced, suggesting that some professional degrees might not benefit from higher student-loan borrowing caps.

Business Insider previously reported that many professional programs, like law or medical school, cost more than $200,000. With the new federal loan limits, some students might choose not to enroll or enter the private student-loan market.

Changes to deferment and forbearance periods

The department is proposing to sunset deferments for economic hardships and periods of unemployment for direct federal loans disbursed after July 1, 2027.

It also wants to expand options for borrowers in default. Defaulted borrowers seeking to return to good standing can enter loan rehabilitationin which they agree with their loan holder to make nine consecutive payments within 20 days of the due date over a period of 10 consecutive months. Once the loan is rehabilitated, the defaulted loan will be removed from the borrower’s credit report.

Trump is seeking to allow borrowers to rehabilitate their loans twice, instead of once, beginning on or after July 1, 2027.