July 1 Student Loan Changes — Higher Rates, Eliminated Programs Explained

If you are borrowing federal student loans for the 2026-27 academic year — or if you are a graduate student who relies on Graduate PLUS loans — July 1, 2026 is a date you need to know. A wave of changes to federal student lending takes effect on that date, driven by rising Treasury yields and the sweeping provisions of the One Big Beautiful Bill Act (OBBBA), signed earlier this year.

Here is everything you need to know before July 1 arrives — just three weeks away.

This is an important story in our Business & Finance coverage at TheTrendsWire.

New Interest Rates — What You'll Pay from July 1

Every year on July 1, the federal government resets interest rates for new student loans based on the May auction of the 10-year Treasury note. This year's auction on May 12 produced a high yield of 4.468% — slightly higher than last year — pushing all new loan rates up by approximately 13 basis points.

Here are the new rates effective July 1, 2026 through June 30, 2027:

| Loan Type | 2025-26 Rate | 2026-27 Rate |

|---|---|---|

| Direct Subsidized (Undergrad) | 6.39% | 6.52% |

| Direct Unsubsidized (Undergrad) | 6.39% | 6.52% |

| Direct Unsubsidized (Graduate) | 7.94% | 8.07% |

| Parent/Grad PLUS Loans | 8.94% | 9.07% |

These rates are fixed for the life of the loan — meaning if you borrow after July 1, 2026, your rate is locked at these levels regardless of what happens to market rates in the future.

What does this mean in real money? According to higher education expert Mark Kantrowitz, every $10,000 borrowed at the new undergraduate rate of 6.52% on a standard 10-year repayment plan results in a monthly payment of $113.64 — and total repayment of $13,636.75 over the decade. That is $76.84 more than at last year's rate.

Important: These rate changes apply only to new loans disbursed after July 1. Existing federal loans keep their current fixed rates permanently.

The Bigger Change: Graduate PLUS Loans Eliminated

The interest rate increase is significant — but the more dramatic change comes from the One Big Beautiful Bill Act, which eliminates the Graduate PLUS loan program entirely for new borrowers starting July 1.

Graduate and professional students who previously relied on Graduate PLUS loans to cover costs beyond the standard Direct Unsubsidized loan limits will no longer be able to access this program if they are new borrowers after July 1. The University of Iowa's financial aid office summarized the impact bluntly: "Starting July 1, 2026, federal law eliminates the Graduate PLUS loan for new Graduate and Professional students."

This is a significant funding gap for many graduate and professional students — particularly those in expensive programs like law, medicine, and MBA programs — who relied on PLUS loans to cover tuition beyond the $20,500 annual unsubsidized loan limit for graduate students.

Who is affected:

• Students starting a new graduate or professional program in 2026-27
• Students changing academic programs or institutions after July 1
• Students who previously relied on Graduate PLUS to cover full costs

Who is NOT affected:

• Continuing graduate students who borrowed Graduate PLUS loans before July 1, 2026
• Undergraduate students (Graduate PLUS was only for grad/professional borrowers)

Repayment Plan Changes Under the OBBBA

Beyond the new loan changes, the One Big Beautiful Bill Act also eliminates several income-driven repayment plans that millions of existing borrowers rely on. The SAVE plan — which was already blocked by courts — and other affordable repayment options are being cut, leaving many borrowers with fewer options if they are struggling with payments.

New Parent PLUS loan limits are also being introduced under the OBBBA, limiting how much parents can borrow each year and in total.

The Department of Education has warned that not all regulations implementing the OBBBA have been finalized — meaning some details may still change before July 1. Borrowers are advised to check studentaid.gov regularly for updates.

What Should You Do Before July 1?

If you are an incoming undergraduate:

• Apply for financial aid through FAFSA as early as possible
• Accept subsidized loans first — the government pays interest while you are in school
• Borrow only what you need — every dollar at 6.52% costs more than it looks

If you are a current or incoming graduate student:

• Check immediately whether you relied on Graduate PLUS loans in prior years
• If you are a new borrower after July 1, explore private loan options as a Graduate PLUS alternative — but compare rates carefully, as private loans lack federal protections
• Contact your school's financial aid office now to understand your specific situation

If you are an existing borrower:

• Your current rates are not changing — existing loans keep their fixed rates
• Check whether your repayment plan is affected by OBBBA changes
• Visit studentaid.gov for updated repayment plan information

Key Takeaways

• New federal student loan interest rates take effect July 1, 2026 — undergrad rate rises from 6.39% to 6.52%, grad unsubsidized from 7.94% to 8.07%, PLUS from 8.94% to 9.07%.
• Rates are fixed for the life of the loan — only new loans disbursed after July 1 are affected.
• The One Big Beautiful Bill Act eliminates Graduate PLUS loans for new borrowers starting July 1.
• New Parent PLUS loan limits are also being introduced under the OBBBA.
• Multiple income-driven repayment plans are being cut — existing borrowers should check their plan status at studentaid.gov.
• Regulations are still being finalized — check studentaid.gov regularly for the latest guidance.
• July 1 is three weeks away — act now if you need to adjust your borrowing plans.