Federal Student Loan Update: July 2026 — What Changed and What It Means for Borrowers

Monthly rundown for borrowers. Current as of July 29, 2026.

If you’ve been sitting in SAVE forbearance waiting for someone to tell you what happens next, a letter is coming, and it gives you 90 days. Miss the window and your servicer picks a plan for you.

Six federal student loan changes took effect in July 2026: the Education Department began mailing 90-day plan-selection notices, the Repayment Assistance Plan opened, PAYE and ICR closed to new enrollment, a federal court vacated the PSLF employer rule, Grad PLUS ended for new graduate and professional students alongside new borrowing caps, and the auto-pay interest discount rose to 1% with a September 30 enrollment deadline. Separately, an appeals court ordered the Department to keep processing borrower-defense claims for more than 500,000 people.

When does my 90 days to leave SAVE actually start?

When your notice arrives. The Department began sending the official notices on July 1, 2026; anything that reached you earlier was only a warning. Ninety days from that first batch puts the earliest possible removal from SAVE at September 29, 2026. The notice language is blunt: “You must now select a new repayment plan within 90 days,” Forbes reported on July 15.

How long the full rollout takes has already changed once. That July 15 reporting indicated some borrowers wouldn’t hear until early 2027. By July 24, Forbes reported that Nelnet had updated its guidance to say its roughly 3 million affected borrowers would all be notified by the end of 2026. The timeline is tighter than it looked two weeks ago, and it can move again.

If you’re in SAVE right now: the only date that binds you is the one printed on your notice. Do nothing and you land on the Standard or the new Tiered Standard plan, where the payment is set by your balance instead of your income and generally won’t count toward Public Service Loan Forgiveness. More on what SAVE borrowers should do during the 90-day window, and on how to check which repayment plan you’re on.

What is RAP, and when did it launch?

The Repayment Assistance Plan (RAP) is the income-driven repayment plan created by the RISE final rule. It became available July 1, 2026. Payments run from 1% to 10% of adjusted gross income depending on your income band, with a $10 monthly floor and a $50 reduction per dependent, and any remaining balance can be forgiven after 360 qualifying payments. Unpaid interest on a full on-time payment is waived.

What to do: for most borrowers leaving SAVE the decision comes down to RAP or Income-Based Repayment (IBR), and the two produce different results on forgiveness timing and total cost. Run both before you choose. Our guide to choosing an IDR plan after the SAVE shutdown walks through the comparison.

Is PAYE still available?

Not to new enrollees, though the record here is not clean. The RISE rule closes PAYE and ICR to new enrollment as of July 1, 2026, while studentaid.gov has described PAYE enrollment as open until July 1, 2027. Until that’s resolved, assume anyone not already enrolled before July 1, 2026 is shut out. We walk through the PAYE and ICR sunset separately.

Did the PSLF employer rule take effect?

No. On June 30, hours before its July 1 effective date, a federal court vacated the Department’s “substantial illegal purpose” employer rule in full, finding it exceeded the Department’s authority under the Higher Education Act and violated the First Amendment. NASFAA reported that June 30 ruling on July 1. Judge Amir H. Ali of the U.S. District Court for the District of Columbia reached the same conclusion in a separate case.

In practice the rule never bit. No employer was disqualified under it, the existing definition of a qualifying employer still governs, and the Department moved in July to remove the related perjury attestation from the PSLF certification form. We treat the vacated PSLF employer rule in a dedicated post.

If you paused your certification this spring because you weren’t sure your employer would still count, that reason is gone. Certify.

Can I still get a Grad PLUS loan?

Not if you’re starting from scratch this year. Grad PLUS was discontinued for first-time borrowers on July 1, 2026. Students who already received a Grad PLUS disbursement before that date can keep borrowing through June 30, 2029 or the end of their program, whichever comes first. New borrowers now face annual and lifetime caps: $20,500 a year and $100,000 total for graduate students, $50,000 a year and $200,000 total for professional students, inside an overall federal borrowing limit of $257,500.

Which programs count as “professional” is being litigated. On June 24 a federal court stayed the Department’s narrowed definition, finding it exceeded its authority, and the Department published an interim list of 29 programs that get professional-level limits while the case proceeds. Inside Higher Ed reported on July 21 that briefing runs into December, so the case is still open. Our guide to the 2026 federal student loan changes covers the borrowing rules in full.

Enrolling this fall? Confirm with your financial aid office which limit your program falls under this year. Don’t assume it matches last year’s.

How do I get the new 1% auto-pay discount?

Enroll in auto-pay through your servicer by September 30, 2026. The Department raised the reduction from 0.25% to a full 1% on Direct Loans originated after July 1, 2012, and it runs through June 30, 2028. Borrowers already enrolled get the additional 0.75% automatically.

Do this one now: it takes a few minutes inside your servicer account. One catch: on an income-driven plan your monthly payment won’t drop, because it’s set by your income rather than your rate. And if you’re moving out of SAVE, you generally need to be on a valid repayment plan first.

Is borrower-defense relief still being processed?

Yes. On July 17 the Ninth Circuit unanimously rejected the Department’s request to pause relief under the Sweet v. McMahon settlement, requiring it to keep discharging loans, refunding payments, and correcting credit reports for more than 500,000 borrowers who applied after the settlement class closed. Forbes reported the ruling on July 21.

If you have a pending claim, most commonly from attending a for-profit school, the Department has been ordered to keep processing it.

What happens next with student loans in August 2026

Three things to watch. Forced collections on defaulted loans, including wage garnishment, are expected to resume once the 90-day windows start closing, and no firm restart date has been announced. Havens v. U.S. Department of Education, the last active lawsuit that could halt the SAVE wind-down, is before the courts, and a ruling either way changes the urgency of everything above. And the Department has not appealed the PSLF employer-rule decision, which it still can.

The dates already on the calendar:

• September 29, 2026: earliest date anyone can be moved off SAVE
• September 30, 2026: auto-pay enrollment closes for the 1% reduction
• End of 2026: Nelnet expects all its affected borrowers to be notified
• December 2026: briefing closes in the professional-degree case
• June 30, 2028: the 1% auto-pay reduction expires
• June 30, 2029: legacy Grad PLUS borrowing ends

The August issue publishes in early September. Every issue in the series is listed at Federal Student Loan News.

Why Finnita

Every change above is a decision with a deadline attached, and the deadlines are staggered borrower by borrower rather than announced once for everyone. The rules are usually the easy part; the paperwork and the calendar are where people lose money. Only 5% of PSLF-eligible borrowers succeed on their own.

Finnita is a student loan enrollment service: we enroll borrowers into the federal repayment and forgiveness programs that fit their situation, using a proprietary algorithm and human analysts, then handle the annual recertification so a missed date doesn’t undo the work. 98% of Finnita customers are successfully enrolled. Customers save an average of $468/month. If you want the broader map first, start with our guide to federal student loan forgiveness.