Reimagining and Improving Student Education
Published Date: 1/30/2026
Proposed Rule
Summary
The Department of Education is shaking up student loans to make things simpler and fairer for grad students, parents, and pros starting soon. They’re setting new loan limits, ending some old repayment plans, and introducing fresh, easier ways to pay back loans. If you’ve struggled before, you might get a second chance to fix your loan and start fresh—all changes kick in after March 2026 with new rules and options.
Analyzed Economic Effects
6 provisions identified: 4 benefits, 2 costs, 0 mixed.
New graduate, parent, lifetime caps
The rule sets new annual and aggregate loan limits: graduate students remain capped at $20,500 annually with a $100,000 aggregate cap, professional degree students may get up to $50,000 annually with a $200,000 aggregate cap, and Parent PLUS loans are capped at $20,000 per student per year with a $65,000 aggregate per student. The OBBB also establishes a new lifetime borrowing cap of approximately $257,500 for most borrowers and phases out unlimited Graduate PLUS borrowing.
Two repayment options; ICR sunset
The Department will replace the current patchwork of repayment plans with two options: a Tiered Standard plan with fixed monthly payments over a 10-to-25 year term, and a new income-driven Repayment Assistance Plan that prevents negative amortization. The Repayment Assistance Plan includes monthly interest cancellation and principal payment subsidies and the rule sunsets existing ICR, PAYE, and SAVE plans for future borrowers.
Taxpayer exposure to loan forgiveness reduced
The Department says the new annual, aggregate, and lifetime caps will reduce taxpayer exposure to high-cost loan terms and loan forgiveness. The notice notes that the Department estimated it forgave $199 billion in student debt from 2021 to 2025 and indicates the caps would produce significant savings to taxpayers.
Rehabilitation allowed twice (after 2027)
Starting on or after July 1, 2027, borrowers may rehabilitate a defaulted Federal Perkins, FFEL, or Direct loan up to two times over the loan's lifetime. The proposed regulations amend Sec. 674.39 and Sec. 682.405 to allow a second rehabilitation beginning July 1, 2027.
Part-time students get reduced loan amounts
The OBBB requires institutions to reduce annual loan limits in direct proportion to a student's percentage of full-time enrollment, and the Department will publish a schedule of reductions in the final rule. This means students enrolled less than full-time will be eligible for smaller annual Direct Loan amounts and may receive smaller credit balances.
FFEL IBR eligibility and formula change
For FFEL borrowers the rule removes the partial financial hardship requirement and defines an "applicable amount" equal to 15% of the borrower's (and spouse's, if applicable) income above 150% of the poverty guideline when calculating IBR payments. The Department proposes conforming changes to Sec. 682.215 to replace partial financial hardship references with this applicable amount.
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Key Dates
Related Federal Register Documents
2026-17239, Education Department General Administrative Regulations
The Secretary of Education proposes to amend the Education Department General Administrative Regulations (EDGAR) and other provisions in 2 CFR parts 3474 and 3485 to update the regulations and better align them with other U.S. Department of Education (Department) regulations and procedures, and to include technical updates from the Office of Management and Budget's Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards published in the Federal Register on April 22, 2024. The Department intends to finalize these regulations in late 2026.
2026-17001, Accreditation, Innovation, and Modernization: The Secretary's Recognition of Accrediting Agencies: Institutional Eligibility Under the Higher Education Act of 1965, as Amended, Student Assistance General Provisions
The Department proposes to revise the existing accrediting agency recognition regulations at 34 CFR part 602 to implement the directives set forth in Executive Order 14279, Reforming Accreditation to Strengthen Higher Education, and other Administration priorities, align the regulations more closely with statute, and reduce regulatory burden.
2026-15019, Rescinding Portions of the Department of Education Title VI Regulations To Align With the Statutory Text and Conform to Executive Order 14281
The Department of Education is changing its rules to stop punishing unintentional discrimination under Title VI, focusing only on intentional discrimination instead. This update, effective July 24, 2026, will make things clearer, cut costs for schools and organizations getting federal money, and follow a new executive order about fairness and opportunity. If you receive federal funds, these changes affect how you follow civil rights rules.
2026-13286, Accountability in Higher Education and Access Through Demand- Driven Workforce Pell: Student Tuition and Transparency System (STATS) and Earnings Accountability
Starting July 1, 2027, colleges must prove their programs help students earn enough money to keep getting federal student loans. This new rule affects schools offering Direct Loans and aims to stop loans for programs where graduates don’t make enough. Some parts kick in earlier on August 31, 2026, so schools better get ready to show they’re helping students succeed in the workforce!
2026-10013, Accountability in Higher Education and Access Through Demand-Driven Workforce Pell: Pell Grant Exclusion Relating to Other Grant Aid; and Workforce Pell Grants
Starting July 20, 2026, students and schools will see new rules for Pell Grants thanks to the Working Families Tax Cuts Act. Now, some other grants won’t count against Pell Grant eligibility, and a new Workforce Pell Grant will help students in short, job-focused programs get financial aid. This means more chances for students to get money for education that leads straight to good jobs!
2026-08556, Reimagining and Improving Student Education-Federal Student Loan Program Final Regulations
Starting July 1, 2026, new rules will change how federal student loans work for grad students, parents, and professionals. The Grad PLUS loan is being phased out, and repayment plans are getting simpler with a fresh new income-driven option. Plus, folks who’ve defaulted before get a second chance to fix their loans and get back on track.
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