Starting July 1, federal stundent loan borrowers will have to face sweeping new rules as US President Donald Trump’s One Big Beautiful Bill Act (OBBBA) begins its rollout. According to a report by CNBC, financial planners warn that the legislation could sharply limit repyamnet and forgiveness pathways for those looking to take new loans, amking borrowing decisions far more consequential. “Be very careful when it comes to taking out new student loans,” said Landon Warmund, a certified financial planner and student loan professional. For those unware, under the new law, anyone who borrows a federal student loan after July 1 will be classified as a ‘new borrower’ and will lose access to several existing repymnmet plans. The present borrowers will retain the options like the the favorable Income-Based Repayment (IBR) plan, which can lead to forgiveness in as little as 20 years and sometimes offers $0 monthly payments for low-income borrowers.New borrowers on the other hand will be restricted to just two repayment choices across all their debt — even older loans:* Repayment Assistance Plan (RAP): Payments range from 1% to 10% of earnings, with forgiveness only after 30 years.* Tiered Standard Plan: Fixed payments over four possible time frames, which consumer advocates warn may be unaffordable for many.
Parent borrowers hit hardest
Trump’s One Big Beautiful Bill Act (OBBBA) will the parent borrowers the hardest. Parents who are taking out Parent PLUS loans after July 1 will have just one repayment option which is the Tiered Standard Plan. They will also lose eligibility for Public Service Loan Forgiveness (PSLF), which previously allowed government and nonprofit employees to have loans excused after 10 years.The OBBBA also phases out deferment protections for new borrowers. Those who take loans after July 1 will no longer be able to pause payments due to unemployment or economic hardship, though current borrowers will retain those options.Also, the borrowers who are planning consolidation should note that Direct Consolidation Loans taken on or after July 1 will be treated as brand-new loans. That means losing access to legacy repayment plans and deferment protections, even if the consolidation was meant to simplify payments or switch servicers.
Planning ahead
As per the CNBC report, experts advise families to carefully reassess borrowing strategies:* A second parent who hasn’t borrowed yet could take out loans to preserve existing repayment options for the first parent.* Students nearing graduation might consider small private loans to avoid triggering new federal rules, though these carry higher risks.* Borrowers should calculate expected payments under RAP or Tiered Standard before committing to new debt.
