Federal student loan changes go into effect Wednesday. Here's what you need to know.

Massive changes are coming to the federal student loan system starting Wednesday, with fewer repayment options for many borrowers and new loan limits for parents, graduate students, part-time students and others.

The new rules are part of President Donald Trump’s tax-and-spending legislation, known as the One Big Beautiful Bill Act, approved last year by Congress. They’re expected to have a broad impact on Long Island and across the country, with nearly 43 million Americans holding $1.7 trillion in federal student debt.

Federal education officials have said the changes are intended to simplify the student loan system, protect borrowers from excessive debt and reduce the cost of higher education. In congressional testimony in May, Department of Education secretary Linda McMahon called college costs “exorbitant” and said they must be reduced.

In many cases, though, student debt experts said borrowers will face higher monthly payments, and the new loan limits could prompt some to take out higher-cost private loans.

Not all the Trump administration's planned changes will take effect on Wednesday. On Tuesday, a federal judge in Massachusetts ruled that the administration cannot impose new restrictions on the Public Service Loan Forgiveness program, which forgives student debt after a borrower works 10 years for government or nonprofit agencies. The administration had sought to ban employers whose work it deemed to have a "substantial illegal purpose" such as providing gender-affirming care to minors.

Many other changes will go into effect as planned, though.

SAVE plan going away

One of the biggest changes is the replacement of older programs such as the Biden-era Saving on a Valuable Education, or SAVE, plan, which linked monthly payments to income, with the lowest-earning borrowers having their payments reduced to zero.

More than 7 million borrowers in the SAVE plan will be notified that they have 90 days to choose one of two new plans, said Michele Zampini, associate vice president for federal policy and advocacy at The Institute for College Access & Success. The new options are the standard plan, which does not take income into consideration, or the income-linked Repayment Assistance Plan, she said. RAP requires payments of up to 10% of a borrower’s adjusted gross income for 30 years.

SAVE borrowers who do not apply for RAP will be placed in the standard plan.

Even in the RAP plan, a family of four earning the national median income of about $80,000 could see monthly payments spike from $36 under SAVE to $440 under RAP, Zampini said. 

“We are really concerned that, you know, if payments go up, then it will create more of an affordability issue for a lot of households, and they may fall behind on payments,” she said.

Two other plans, the Income-Contingent Repayment (ICR) and Pay As You Earn (PAYE) plans, are also being phased out but not until 2028.

Borrowers can get more information about their loans and compare repayment options at studentaid.gov.

The prospect of having to make higher student loan payments is “discouraging,” said Westbury resident Jada Daniels, 21, who will begin a master’s program in aerospace engineering at Villanova University this fall. Daniels said she hopes to pay off her student debt within 10 years, but she said she worries that she could face steep student loan payments in addition to rising rental costs.

“I don’t think anyone who has the passion or wants to go to college should be shot down because they can't afford it,” Daniels said.

New loan limits

 Other changes that take effect Wednesday include a new $20,000 per year and $65,000 lifetime limit on Parent PLUS loans. Previously, parents could borrow up to the full cost of tuition.

The new limits are making it more difficult for families to pay for out-of-state or private schools, said Nick Prewett, assistant provost and executive director of financial aid at Stony Brook University. "It's an affordability issue for many families," he said. 

Other families might choose to take out private loans, but those come with higher interest rates, he said. 

Parents who first took out federal loans before this month can still take advantage of the older, higher loan limits under a “legacy” provision, but only if students remain continuously enrolled without any breaks, even for medical or financial reasons, said Sandra Mervius, director of financial aid at Hofstra University in Hempstead.

“We've been telling our students, ‘Remain enrolled full time to the best of your ability,’ ” Mervius said.

Under the new rules, part-time students also will have their loan limits reduced if they’re enrolled in fewer than 12 credits. Previously, “if you were enrolled in six credits towards a degree, you would be eligible for 100% of your loans,” said Scott Kalb, acting director of financial aid at Nassau Community College, where about 300 part-time students received federal student loans last year. Those students are likely to see their loans reduced either in the fall or spring semester, depending on their circumstances, he said.

In addition to those restrictions, the new limits also include a cap of $20,500 a year and $100,000 total for many graduate programs, and up to $50,000 a year and $200,000 total for what are considered "professional" programs, such as medicine and law.

On Monday, the Education Department said nursing and certain other graduate programs will qualify for the higher professional loan limits as a result of a federal judge’s order, at least as long as the order remains in effect, though the department said it will continue to advocate for the lower graduate limits for nursing and certain other programs.

One of the programs that still faces the lower $20,500 annual limit is psychology master’s degree programs.

Grayson Kaufman, a senior studying psychology at Stony Brook University, said he hopes to enroll in a master’s or doctoral program in psychology. He said he would need loans if he pursues a master’s degree; doctoral programs tend to be fully funded.

“Restructuring of the loans to make it harder to pay them back will make it harder for people to have an education,” he said. “I would probably be in debt for 10 years if I stayed in New York.”

Newsday's Nora Toscano and Angelina Livigni contributed to this story.