Federal Student Loan Update: Key changes in the One Big Beautiful Bill that affect lawyers
Enactment in the summer of the One Big Beautiful Bill Act ushered in landmark changes to the federal student loan system. The act will require prospective law students to plan differently for financing their education and will affect lawyers’ repayments of their student debt.
The OBBBA takes effect for new borrowers on July 1, 2026, and it shifts those already in repayment plans into new plans by July 1, 2028. It reshapes four key areas, with major implications for lawyers and other professionals with significant student debt.
First, the OBBBA eliminates the federal Grad PLUS program, which for years allowed students to borrow up to the full cost of attendance—tuition, fees, and living expenses. Law students, with annual tuition routinely exceeding $60,000 at many private institutions, could fund nearly their entire education with federal loans.
That era is over. Private lenders will likely fill the gaps, but their loans have historically lacked many of the flexible repayment options, forgiveness provisions and borrower protections of federal loans.
Private loans are also not eligible for the Public Service Loan Forgiveness program. Their interest rates may be higher or more volatile, and their terms less forgiving. For first-generation law students and those without family wealth, the loss of Grad PLUS is especially acute.
To partially offset the loss of Grad PLUS, the second area the OBBBA reshaped was to increase borrowing limits under the Direct Unsubsidized Stafford Loan program, known as the Stafford program. Professional graduate students will see Stafford program annual caps grow from $20,500 to $50,000, with a lifetime cap of $200,000 (excluding undergraduate borrowing).
But because the caps are fixed and not indexed to higher education costs or inflation, they function as shrinking caps. As law school costs continue to outpace inflation, Stafford loans will cover a smaller share each year.
The third area reshaped by the act is the consolidation of multiple income-driven repayment programs into a single Repayment Assistance Plan. The Department of Education promoted this as simplification—effectively collapsing SAVE, PAYE and income-contingent repayment into one program.
One positive feature of the RAP program is that balances decline each month. If a borrower’s monthly payment does not cover accruing interest, the unpaid portion is waived. This ends the frustrating cycle of balances growing despite faithful payments. Borrowers in RAP also remain eligible for PSLF.
However, unlike earlier repayment plans based on discretionary income, RAP calculates payments based on a borrower’s total adjusted gross income, often resulting in higher payments for law borrowers. RAP also requires 30 years of payments before eligibility for loan cancellation, compared to 20 to 25 years under other IDR plans and as little as 10 years under SAVE.
Graduates with high balances relative to starting salaries will be hit hardest. A Congressional Research Service analysis confirms that RAP’s structure most affects borrowers with high debt-to-income ratios.
Alongside RAP, the fourth area reshaped by the OBBBA involves introducing a revised standard repayment plan. Unlike the traditional fixed-payment 10-year plan, the new structure allows more flexibility through tiered schedules.
Borrowers will be able to choose whether to structure their payments based on how much they borrow or how much they earn, which modernizes repayment.
What about PSLF?
But under the OBBBA, most if not all borrowers under the new tiered standard repayment plan are not expected to be eligible for PSLF. There has been confusion over whether the exclusion from PSLF was intended. But unless it is corrected, the standard plan would not be a viable option for lawyers going into public service.
Together, these four key areas impacted by the OBBBA could shift professional graduate financing from the federal government to private lenders, who have yet to adapt to the OBBBA changes. Law students have been among the safest investments with some of the lowest default rates. The act’s architects emphasized that new loan restrictions will reduce federal liability, but the trade-off may chill access to professions like the law for those without financial backing.
Thanks to advocacy by the ABA and allied organizations comprising the PSLF Coalition, the Public Service Loan Forgiveness program itself survived largely intact in the OBBBA. PSLF enables law school graduates and other professionals with typically higher student debt loads to work in lower-paying public service careers by offering partial student loan forgiveness for a service commitment of at least 10 years and 120 qualifying payments.
One uncertainty facing PSLF candidates, however, is a new Department of Education rule going into effect July 1 that will disqualify employment at government agencies or nonprofit organizations the Secretary of Education deems engaged in “substantial illegal” activities. The regulation furthers Executive Order 14235, Restoring Public Service Loan Forgiveness. Among other serious concerns, the rule fails to properly define prohibited conduct and includes activities that are legal but contrary to federal administration policy.
ABA President Michelle Behnke opposed the changes in September 2025, after the ABA previously warned in May that such action would be unlawful.
The American Bar Association has long advocated for loan forgiveness for lower-income public service lawyers, borrower protections and fair access to legal education. As the OBBBA is implemented, the ABA Governmental Affairs team will monitor its impact on law students and practicing lawyers, press for technical fixes to protect PSLF and continue advocating for a loan system that avoids outsize burdens on those entering the legal profession.
This report is written by the ABA Governmental Affairs Office and discusses advocacy efforts by the ABA relating to issues being addressed by Congress and the executive branch of the U.S. government. Follow @ABAGrassroots on social media.
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