Interest is BACK for millions of federal student loan borrowers starting August 1st! Get ready for a major financial shift. New lifetime borrowing limits and the end of Grad PLUS loans are coming in 2026 under the Trump administration. How will this change higher education? Big changes are here and on the horizon for federal student loans. Stay informed about the immediate impacts and future structural reforms. #EducationFinance #LoanReform #StudentDebtCrisis
00:00These are the student loan changes you should be aware of.
00:04Significant shifts are underway for millions of federal student loan borrowers across the United States.
00:10While some key changes are imminent, others are set to redefine the landscape of student financing in the coming years.
00:18These measures are part of a broader fiscal and spending package championed by President Donald Trump,
00:23which he has referred to as the one big beautiful bill.
00:27It's crucial for borrowers to understand both the immediate adjustments and the future structural reforms.
00:34Let's break down the key changes to keep in mind.
00:37These individuals had previously benefited from an interest-free forbearance period under the saving on a valuable education plan,
00:45established by the Biden administration.
00:48Us Secretary of Education Linda McMahon clarified that previous administrations used so-called loan forgiveness promises to win votes.
00:56But federal courts repeatedly ruled that those actions were unlawful.
01:00The administration has also linked the return of interest accrual to complying with a federal court injunction that blocked the Save Plan S implementation.
01:09This trend could challenge President Donald Trump's pledge to increase birth rates across the country.
01:15However, it's important to note that the court did not explicitly mandate the resumption of interest.
01:21Immediate changes. Effective August 1st. The most pressing change affecting millions of borrowers takes effect on August 1st.
01:32These include borrowers currently under Save do not yet know when their administrative forbearance will end or when payments will resume.
01:40Though their interest will now begin to accrue, these reforms will cap how much money individuals can borrow from the federal government for college and graduate school.
01:50The Department of Education is now encouraging borrowers to switch to new repayment plans, portraying Save as a false promise of loan cancellation and zero monthly payments.
02:00Over the next 12 months, borrowers are expected to be charged more than $27 billion in interest.
02:07Resumption of interest charges. The Trump administration will resume interest charges on the accounts of approximately 8 million borrowers.
02:17The Trump administration has officially deemed the Save Plan illegal, stating its intention to bring back fiscal responsibility to the federal student loan portfolio.
02:30Significant financial impact. This change is predicted to have substantial financial consequences.
02:37Wider Repercussions on Young Adults' Lives
02:40Experts warn that the return of accruing student loan interest could have major implications for young adults and America's population as a whole.
02:49Currently, parents of dependent undergraduates can borrow up to the full cost of attendance each year.
02:55Delaying family formation, student loan debt has been linked to a reduction in marriage and childbearing among young adults.
03:02Students may have to borrow less, make up the difference with private loans, or potentially not start or complete graduate programs.
03:12Aspiring lawyers, doctors, and dentists are considered most likely to be impacted.
03:17As these changes represent quite a substantial cut in the loans students have access to.
03:23Impact on health and well-being. Research indicates that the strain of debt can lead to putting off medical care.
03:30Cutting spending on prescription medication or canceling gym memberships.
03:35Reduced savings. Many young adults are unable to save significantly.
03:40That all for retirement because their extra income is consumed by loan payments.
03:45Changes in spending habits.
03:48Borrowers have reported switching to cheaper products at the grocery store or even reducing their overall grocery bill.
03:55Ongoing uncertainty for borrowers.
03:57Despite these imminent changes, significant uncertainty persists.
04:01Future changes?
04:03Effective July 1, 2026 beyond the immediate changes.
04:07President Donald Trump's tax and spending package will introduce sweeping structural changes too.
04:13Federal student loans starting in mid-2026.
04:17Specifically July 1, 2026 for new borrowers.
04:20Here are the key future changes.
04:24Total lifetime borrowing limit for the first time.
04:27Borrowers will face a total lifetime borrowing.
04:30Limit of $257,500 for all federal student loans.
04:36Graduate student loan caps.
04:38Unsubsidized student loans for graduate students will be capped at $20,500 per year with a lifetime.
04:45Limit of $100,000 currently.
04:49Graduate students can borrow up to the full cost of attendance annually.
04:54Borrowing for professional degrees will be limited to $50,000 per year and $200,000 over a lifetime.
05:01Elimination of grad plus loans.
05:04Grad plus loans which currently allow graduate students to borrow up to their entire cost of attendance.
05:10Will be eliminated entirely.
05:13Parent plus loan caps.
05:15Parent borrowing through the federal.
05:17Parent plus loan program will be capped at $20,000 per year per student with a $65,000 lifetime limit.
05:25Impact of borrowing limits.
05:28These new limitations are expected to reshape how students borrow.
05:32Potential check on tuition costs.
05:35Some experts believe these new loan limits could provide a much needed check on soaring tuition costs.
05:41Which have outpaced inflation and other household expenses in recent decades.
05:46Shift to private loans.
05:48With federal loan limits in place, students are likely to seek out other lenders to bridge funding gaps.
05:54While roughly 90% of student loans currently come from the federal government.
05:59And 10% from private lenders, this balance could shift.
06:04Private student loan originations have already seen a significant jump.
06:08New repayment assistance plan.
06:10Looking ahead, the Trump administration is also offering a new income-based repayment assistance plan.
