The Ombuds Observer
June 2026 | Edition 012
| | Welcome to the June 2026 issue of The Ombuds Observer! Each issue brings helpful tips and timely updates on education loans, as well as a few insights to make the whole process a little less overwhelming. We’re glad you’re here! | |
We are Moving!
Starting July 1, 2026, the Office of the Student Loan Ombudsperson will have new digs! Over the next couple of weeks, please pardon our appearance as we transition our office from the Department of Banking to the Office of Higher Education, located at 450 Columbus Ave, Hartford, CT.
During this transition, some of our services may be temporarily delayed or unavailable. Our website, however, will remain available and is the best resource for updates and information as we may be unable to respond to inquiries for a brief period as services are shifted to the Office of Higher Education.
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The Office of the Student Loan Ombudsperson will be temporarily unavailable
June 29, 2026 through July 6, 2026
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Federal Student Loan Changes Begin July 1: What Borrowers Need to Know
Beginning July 1, 2026, sweeping federal student loan changes as a result of the One Big Beautiful Bill Act (OBBBA/OB3) are expected to take effect. We’ve highlighted and recapped these important changes that will impact borrower repayment options and borrower benefits. Our office strongly encourages borrowers to review the below changes and log onto StudentAid.gov to review their loan information.
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Changes expected to take effect
July 1, 2026
| | | | |  | The SAVE Plan is ending and borrowers enrolled in SAVE should prepare | | | |
Borrowers enrolled in the Saving on a Valuable Education (SAVE) plan should prepare for the following:
- Starting on or around July 1, 2026, loan servicers will start notifying SAVE borrowers via email that they need to move to a different repayment option.
- Borrowers will have 90 days from the notice date to choose a different repayment plan.
- Those who do not choose a new plan may be automatically placed into a Standard or Tiered Standard repayment plan.
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You do not have to wait to switch plans. Borrowers can contact their services today to explore which repayment option makes the most sense for their financial picture.
| | | | | A new repayment plan launches: RAP | | | |
A new income-driven plan called the Repayment Assistance Plan (RAP) becomes available July 1, 2026. Key features include:
- RAP requires you to pay a percentage of your adjusted gross income (AGI), ranging between 1% to 10%.
- $50 per dependent will be deducted from the monthly payment.
- Minimum monthly payment of $10/month.
- Interest subsidies intended to prevent balances from ballooning.
- Forgiveness after 30 years of qualifying payments.
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May retain access to legacy repayment options depending on borrowing history.
Some existing repayment options (PAYE and ICR) will be sunsetted by July 1, 2028.
| | | RAP will be the only income-driven repayment option. | | | | | | Federal Direct Loan Graduate PLUS loans are eliminated for new borrowers | | | |
One of the most significant federal student loan changes from OB3 impacts graduate and professional student borrowers.
- Starting July 1, 2026, Federal Graduate PLUS loans will be discontinued and will no longer be offered to new graduate and professional student borrowers.
- New graduate and professional student borrowers will need to explore alternative loan options.
- Current Grad PLUS borrowers may qualify for a limited exception that will allow them to continue borrowing Grad PLUS loans for a maximum of three years.
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The Connecticut Higher Education Supplemental Loan Authority (CHESLA) has partnered with the State of Connecticut to provide an alternative loan option for graduate and professional students.
Click on the below image to head over to CHESLA.org to learn more.
| | | | | | New graduate and professional student borrowing caps | | | Effective July 1, 2026, there are new annual and lifetime limits on graduate and professional student borrowing as described in the table below. | | | | A lifetime (aggregate) federal borrowing limit of approximately $257,500 applies to combined undergraduate and graduate student loans. | | | | | Parent PLUS Loans will face both new borrowing limits and reduced repayment flexibility | | |
- Beginning July 1, 2026, new Parent PLUS loans are capped at:
- $20,000 per dependent student, per year (annual limit).
- $65,000 per dependent student, in total (aggregate limit).
- For all federal Parent PLUS Loans borrowed on or after July 1, 2026, the only repayment option available will be a new tiered standard repayment plan.
- Borrowing a Parent PLUS Loan on or after July 1, 2026 will prevent borrowers from receiving Public Service Loan Forgiveness (PSLF), even if qualifying payments have already been made.
| | Federal Borrowers Enrolled in Auto Pay Will Be Eligible for Interest Rate Reduction | | |
June 18, 2026 – The U.S. Department of Education (ED) announced a new initiative earlier this month that allows federal student loan borrowers enrolled in auto pay to be eligible for a 1 percent interest rate reduction. The reduction is slated to begin July 1, 2026, and will benefit borrowers who are already enrolled in auto pay, or borrowers who enroll in auto pay by September 30, 2026. The reduction will run through June 30, 2028. ED states in their press release they expect the temporary incentive will, “…drive up repayment rates and significantly improve the overall health of the federal student loan portfolio.”
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Professional Student Definition Change Temporarily Paused by Federal Court
June 25, 2026 - Just days before the implementation of a revision to the Department of Education’s (ED) definition of the programs that constitute a professional degree, a federal court has issued a stay order in response to a consolidated lawsuit brought by professional associations representing multiple healthcare-related professionals against ED. The order pauses two pieces of the final rule issued by the Reimagining and Improving Student Education (RISE) Committee during Negotiated Rulemaking sessions held in the Fall of 2025. The final rule narrowed the professional degree definition to eleven fields of study.
NASFAA reports the stay order pauses the following:
- Part (i) of the professional degree definition at 34 CFR 685.102, “which contained ED’s new requirements that narrowed the fields of study that would be considered professional degree programs, and the requirement that a degree program be free from another professional’s supervision, which appeared in the rule’s preamble.”; and
- Part (ii) of the final rule, which lists the eleven fields ED established as professional degree programs.
This story is still developing and considerable uncertainty remains. Newsweek reports U.S. District Judge Beryl Howell, “has ordered both sides to submit a joint status report with a proposed schedule for further proceedings by July 2.” Institutions are advised to seek their own legal counsel in the interim.
| | Our Resource Hub brings together useful websites and guides we recommend bookmarking to help you stay informed and manage your student loans with confidence. | | | | |
Federal Student Aid (FSA) is the definitive resource on all federal student loans, including repayment and forgiveness options, servicer information, and more.
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Bookmark our webpages to stay informed on recent and upcoming changes to student loan administration and to access helpful student loan repayment resource guides.
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Finaid has been a trusted guide to college financial aid for over 30 years, helping students and families navigate the Free Application for Federal Student Aid (FAFSA), scholarships, grants, loans, and more.
| | We're going to keep these tips pinned as helpful reminders as we head toward the upcoming student loan changes that will be effective July 1, 2026. | | | |
Check Your Repayment Status
Log on to Federal Student Aid to understand whether you are in default, delinquent, or in a repayment plan — and check if wage garnishment or tax refund offset notices apply to you.
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Plan for Potential Tax Liability
If you’re nearing forgiveness under an IDR plan, consult a tax professional about the impact of taxable forgiveness in 2026.
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Stay Informed on Processing Delays
Because of legal challenges and plan revisions, applications and forgiveness processing may be delayed — stay in close contact with your servicer.
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