What "federal" buys, stated as rights rather than as a feeling. A federal student loan carries eligibility for income-driven repayment, so the payment can be tied to income rather than to the balance. It is discharged on the borrower's death and on a finding of total and permanent disability. It carries statutory deferment and forbearance entitlements that pause payments in defined circumstances rather than at a lender's discretion. It can be rehabilitated out of default and returned to good standing. And it is the only kind of education debt eligible for public service loan forgiveness. Interest rates are set once a year by statutory formula and are the same for every borrower of that type in that year, which is a different pricing model entirely from private lending: no credit score, no risk-based margin, and for Stafford loans no underwriting or co-signer. Parent and Grad PLUS loans are the exception, carrying an adverse-credit history test.
The 1 July 2026 dividing line is now the organising fact of the whole family, because it determines both what a student can borrow and how they will repay. Public Law 119-21 made four changes from that date. Graduate and professional students can no longer receive a PLUS loan. Their unsubsidized annual limits are $20,500 for a graduate student and $50,000 for a professional student, with aggregates of $100,000 and $200,000 — but note what that does and does not change. The graduate annual limit is unchanged; only the professional limit rose. So for a graduate student the practical effect is that total federal borrowing capacity fell, because Grad PLUS could be taken up to the full cost of attendance and nothing replaced it. Parent PLUS borrowing survives but is now capped at $20,000 a year per dependent student across all of that student's parents, with a $65,000 aggregate that is computed "without regard to any amounts repaid, forgiven, canceled, or otherwise discharged" — so repaying does not restore capacity. A new lifetime cap of $257,500 applies to what a student can borrow, excluding parent PLUS loans borrowed on their behalf. Undergraduate Stafford limits were left alone.
The interim exception is the part most summaries omit, and it decides real cases. A student who, as of 30 June 2026, was already enrolled in a program of study and had already received a loan for that program — or on whose behalf one was made, which is how a parent PLUS borrower qualifies — keeps the old limits and old eligibility for their "expected time to credential", defined as the lesser of three academic years or the time remaining in the program. The exception covers all four of the changes above: Grad PLUS eligibility, the new graduate unsubsidized limits, the parent PLUS caps and the lifetime cap. So a graduate student partway through a degree can still take Grad PLUS loans that a classmate starting in the autumn of 2026 cannot, and a rising senior whose parents have already borrowed is not yet subject to the parent PLUS caps. Anything that flatly asserts Grad PLUS is unavailable is wrong for that cohort, into roughly 2029. The protection is conditional on staying enrolled: under 34 C.F.R. 685.203(j)(4), a student who withdraws or otherwise stops attending the program after receiving the exception falls under the new limits.
Repayment now depends on when you borrowed, and one new loan moves you. For loans made on or after 1 July 2026 the statute offers exactly two plans: a standard plan whose term is set by the size of the balance, and the Repayment Assistance Plan, an income-based plan in force from the same date. Older loans keep the longer legacy menu, but income-contingent repayment authority is repealed effective 1 July 2028, and borrowers on plans in that family must choose another plan before then; anyone who does not choose is enrolled automatically in the Repayment Assistance Plan, or in income-based repayment if their loans are not eligible for it. Income-based repayment is separately authorised by statute and is not sunset. The trap sits in the wording of the new rule: it applies to a borrower of a loan made on or after 1 July 2026 including one who also has older loans, and it requires all of that borrower's outstanding loans to be repaid under the same selected plan. Taking one new loan can therefore pull a whole existing balance into the two-plan world. The plans themselves, their arithmetic and their forgiveness timelines belong to the individual repayment entries.
