Student loan information

Federal student loan rules are changing in two major ways. First, the Department of Education will end the Saving on a Valuable Education plan (SAVE). Second, Congress enacted P.L. 11921 (HR1) on July 4, 2025, which restructures borrowing limits and repayment options for future students and early career professionals. These changes affect medical students, residents, and practicing physicians across New Mexico.

Borrowers should contact their school financial aid office (if still enrolled) or their loan servicer (if in repayment) to discuss their specific situation. For a detailed overview of how federal student loans changed after HR1, view this AAMC video.

The Department of Education has announced an agreement that will officially end SAVE. Borrowers enrolled in SAVE will have a limited window to choose a new repayment plan and restart payments. This affects every borrower who relied on SAVE for lower payments and interest support.

What this means for borrowers

• Borrowers in SAVE must move to a different Income Driven Repayment plan in early 2026.

• Remaining plans include Pay As You Earn (PAYE), Income Based Repayment (IBR), and Income Contingent Repayment (ICR).

• The new Repayment Assistance Plan (RAP) is still in development and is not expected to be ready before borrowers must switch.

• PAYE and ICR remain available for now but are expected to close by 2028.

• IBR will remain available even after other plans are retired.

How to prepare

Review your repayment strategy now. Compare the remaining plans and consider how each aligns with your long term financial goals. New Mexico residents can also explore the Health Professional Loan Repayment Programs offered through the New Mexico Higher Education Department (NMHED). These programs support eligible health professionals who serve communities across the state.

New Mexico Resource New Mexico Higher Education Department (NMHED) Health Professional Loan Repayment Program https://hed.nm.gov/financial-aid/loan-repayment-programs/health-professional

Congress enacted P.L. 11921 on July 4, 2025. The law changes federal borrowing limits, repayment plan structures, and certain deferment and forbearance rules. Some provisions take effect July 1, 2026. Others phase in through 2027 and 2028.

Key changes

• New repayment architecture. For loans first disbursed on or after July 1, 2026, borrowers will have two repayment options: a restructured Standard Repayment plan and the new income based Repayment Assistance Plan (RAP).

• RAP basics. RAP sets payments on a sliding scale based on adjusted gross income. Payments range from roughly 1 to 10 percent of income with a $10 minimum. RAP includes an interest waiver for unpaid interest and a principal match of up to $50 to ensure balances decline. Remaining balances are paid off or eligible for forgiveness after 30 years. RAP payments count toward Public Service Loan Forgiveness when all other rules are met.

• Graduate and professional borrowing limits. Grad PLUS loans are phased out for future borrowing. New annual and lifetime caps apply to graduate and professional students. Medical schools and students should plan around tighter federal borrowing capacity after July 1, 2026.

• Phaseout and grandfathering. Borrowers with loans disbursed or consolidated before July 1, 2026, generally retain access to legacy repayment options through June 30, 2028. Taking new loans or consolidating after the cutoff can change which plans remain available.

• Deferment, forbearance, and tax considerations. Certain deferments end for loans made on or after July 1, 2027. Some forbearance allowances shorten. The temporary federal tax exclusion for income driven repayment forgiveness applied through 2025, so borrowers should plan for possible taxability of future forgiven balances.

Residents, fellows, and attending physicians should take the following steps.

• Identify your loan types and servicer. Make a checklist of Direct Subsidized, Direct Unsubsidized, Grad PLUS, Parent PLUS, Direct Consolidation, and private loans.

• If you rely on income driven benefits or PSLF timelines, certify employment annually and track qualifying payments with the PSLF Help Tool on StudentAid.gov. . RAP payments will count toward PSLF when all other rules are met.

• If you are on SAVE, PAYE, or ICR, evaluate your options now. The Department has encouraged borrowers to review the IBR plan and prepare for transitions. Legacy plans will be phased out for many borrowers by July 1, 2028.

• If you must consolidate to access a particular plan or PSLF benefit, act before Department deadlines. Consolidation timing matters.

• If you expect forgiveness, consult a tax professional about potential tax exposure after 2025.

Students considering medical school should understand how borrowing rules change for loans first disbursed on or after July 1, 2026.

Borrowing limits

• New aggregate limit for professional level borrowing is $200,000.

• New lifetime cap is $257,500 across all undergraduate and graduate borrowing. Parent PLUS borrowing does not count toward this cap.

Planning steps

• Request modeled cost scenarios from your school’s financial aid office based on the July 1, 2026 rules.

• Maximize non loan aid first, including institutional scholarships, service programs, National Health Service Core opportunities, state loan repayment programs, and military health profession scholarships.

• If you expect to borrow across multiple years, ask your school whether you will be grandfathered under the old rules for your full program. Request written confirmation.

• Use private loans only as a last resort. Private loans do not offer federal protections or PSLF eligibility.