The ‘big beautiful bill’ mortgage loan changes come into effect on July 1

Student loan borrowers who take out certain measures will soon face fewer payment options and loan forgiveness options, thanks to President Donald Trump’s One Big Beautiful Bill Act.

“Be very careful when it comes to taking out student loans,” says Landon Warmund, a certified financial planner and certified student loan specialist at Reliant Financial Services in Kansas City, Missouri.

That’s because federal student loan borrowers after July 1 will go from “legacy borrower” to “new borrower,” depending on a number of different rules included in legislation passed last year, said Kathleen Boyd, CFP and founder of Student Loan Savvy in San Diego.

“It’s the most important things,” Boyd said.

Here’s what you need to know.

The OBBBA is ending several US Department of Education student loan repayment programs. Existing borrowers will retain access to some of those programs, including the approved Income-based Repayment, or IBR, program, Boyd said.

However, anyone who takes out student loans after July 1 will be left with just two new payment options for all of their debt, even old loans: the Repayment Assistance Plan, or RAP, and the Tiered Standard Plan.

“Even a small amount of undergraduate or Parent PLUS debt after July 1 is enough to eliminate your chance of repayment under your current desired plan,” said Warmund, a member of CNBC’s Financial Council.

Many borrowers, in particular, won’t want to lose the IBR option: The program can lead to loan forgiveness in as little as 20 years and offer low-income borrowers a $0 monthly payment, Boyd said.

Under RAP, monthly payments typically range from 1% to 10% of your earnings; the higher your income, the higher your required payment. The program leads to student loan forgiveness only after 30 years.

The Tiered Standard Plan spreads your debt into fixed payments over one of four periods, depending on how much you owe. Consumer advocates say the monthly bill for the program will be unaffordable for many.

Borrowing parents will want to be especially careful when taking out a loan, says higher education expert Mark Kantrowitz. That’s because those who take out a Parent PLUS loan after July 1st will have one way to pay off their loan: the Standard Tiered Plan.

Those parent borrowers will no longer be eligible for Public Service Loan Forgiveness, as the program requires borrowers to be in an income-driven repayment plan such as IBR or RAP or the Regular Repayment Plan. PSLF allows nonprofit and government employees to have their student loans forgiven after ten years.

OBBBA also outlines other assistance options for student loan borrowers who are unemployed or experiencing economic hardship. Current borrowers can still temporarily suspend their loan payments during these periods, but those who take out loans after July 1 will no longer be able to use the unemployment deferral or the economic hardship deferral.

But what if you were relying on extra loans to keep paying for college or high school? Many families will have no choice but to continue borrowing, Kantrowitz said. If so, it will be important to review your expected loan payments once you graduate and ensure that you are not borrowing too much.

Others can do some planning.

For example, the second parent in the household who does not have a loan may take out a loan. That way, a parent who already has a loan can maintain their loan forgiveness and affordable payment options.

Students nearing the end of their education may consider small private student loans to avoid losing federal benefits on their previous loans, Kantrowitz said. But be aware: Private student loans can come with their own risks, including higher interest rates and fewer protections compared to federal loans.

Many student loan borrowers at some point choose to consolidate their loans, which combines their various loans into one, Kantrowitz said. Some of the common reasons borrowers combine include the desire to change student loan servicers or to get a lower payment by restarting their loan term.

But new rules make that move less profitable: “Getting a Direct Loan on or after July 1 will be considered a brand new loan,” he said.

It’s the same as taking on new money, Kantrowitz said. That means, among other consequences, you will be left with only two payment options and you will no longer be able to stop your payments if you lose your job or fall on hard times.