Federal Courts Block Trump Administration's Restrictions on Student Loan Forgiveness Programs

Two federal judges blocked a Trump administration rule that sought to restrict Public Service Loan Forgiveness (PSLF) eligibility for public service workers whose employers engage in disfavored activities. U.S. District Judges Myong Joun and Amir Ali ruled the policy unlawful and unconstitutional. Meanwhile, the Department of Education proceeded with a broader student loan overhaul on July 1, 2026, introducing new repayment plans, eliminating the SAVE plan, and enforcing strict borrowing caps on graduate students and parents.

Student loan repayment plan overhaul

• ▪The Repayment Assistance Plan waives unpaid monthly interest for student loan borrowers who make their required monthly payments.
• ▪The tiered standard repayment plan offers fixed student loan repayment terms over 10, 15, 20, or 25 years based on the total amount borrowed.
• ▪The Repayment Assistance Plan calculates monthly student loan payments based on 1% to 10% of a borrower's adjusted gross income.
• ▪The U.S. Department of Education rolled out a new student loan repayment plan overhaul on July 1, 2026.

SAVE plan borrower transition

• ▪The Trump administration eliminated the Biden-era SAVE student loan repayment plan in March 2026.
• ▪Beginning July 1, 2026, student loan servicers will send notices giving SAVE plan borrowers 90 days to enroll in a new repayment plan.
• ▪SAVE plan borrowers who do not select a new plan within 90 days will be automatically placed in standard or tiered repayment plans.

Graduate student borrowing caps

• ▪A court order blocked the U.S. Department of Education from narrowing the definition of professional students to 11 programs on July 1, 2026.
• ▪The U.S. Department of Education established a $100,000 lifetime federal borrowing cap for graduate students starting July 1, 2026.

Parent PLUS loan limits

• ▪The parent PLUS program established a maximum borrowing limit of $65,000 over the course of a child's undergraduate program starting July 1, 2026.
• ▪Beginning July 1, 2026, parents borrowing under the parent PLUS program are limited to $20,000 per child each academic year.

Public service loan forgiveness restrictions

• ▪The blocked rule sought to disqualify employers from the Public Service Loan Forgiveness program if they had a substantial illegal purpose.
• ▪The Public Service Loan Forgiveness program allows federal student loan forgiveness after 10 years of working for government or nonprofit employers.
• ▪U.S. District Judge Myong Joun and U.S. District Judge Amir Ali blocked a Trump administration rule restricting Public Service Loan Forgiveness eligibility.

Private student lending expansion

• ▪Washington University School of Law and Yale's public health school announced private student loan programs to fill federal funding gaps.
• ▪Major private student loan lenders indicated preparation for an influx of federal borrowers due to new federal borrowing caps.

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