By Elyse Goncalves
The options for paying for college just changed in a big way.
The Trump administration's overhaul of federal student loans goes into effect Wednesday and caps how much people can borrow while limiting the ways they can repay the loans. The changes are intended to clamp down on the skyrocketing cost of college, with student loan debt now at around $1.7 trillion.
Here's what you need to know, whether you are a parent, graduate student or an undergraduate.
I'm a parent interested in helping pay my child's tuition
Parents used to be able to borrow up to the full cost of their child's undergraduate education. Now borrowing is capped at $20,000 a year per child, or $65,000 total.
There is also now only one repayment option for Parent PLUS loans, instead of the several plans parents could previously choose from. To help make monthly payments more manageable, the new Tiered Standard Plan stretches out payments over 10 to 25 years, depending on the size of the balance. Parents are also no longer eligible for Public Service Loan Forgiveness.
Scott Buchanan, executive director of the Student Loan Servicing Alliance, said families should think about whether they can afford a school's cost before turning to Parent PLUS loans, which have a higher interest rate than other federal student loans.
"Don't turn to it as a solution of first resort. It should be a solution of last resort," Buchanan said.
I'm a graduate student looking to borrow
A lot is in flux for graduate students.
Borrowing for graduate school is still limited to $20,500 a year, but now capped at a total of $100,000 over the course of the degree, down from the previous $138,500. For those pursuing what are classified as professional degrees, such as law and medical degrees, the cap is being raised to $50,000 annually, or $200,000 total .
At the same time, the Education Department wants to change what counts as a professional degree and remove the designation for nursing, accounting and other degrees. A federal court temporarily blocked the move, but the government has said it plans to defend its changes.
While that is still being hashed out in courts, those who aren't sure how their degrees will be classified should ask their academic institution how much in loans it plans to offer, said Megan Walter, an analyst at the National Association of Student Financial Aid Administrators.
"It's really going to come down to what institutions' in-house counsel says and the risk they're willing to take on," Walter said.
All graduate students also now face a lifetime borrowing limit of $257,500 including undergraduate loans, regardless of the type of graduate degree they are pursuing.
I'm an undergraduate and need to borrow
The amount undergraduates can borrow remains unchanged this year. Those who are still dependent on their parents can take out up to $5,500 for their first year, and a bit more in subsequent years, for a total of $31,000 over the course of their degree. Independent undergraduates who support themselves can take out $9,500 in the first year, and $57,500 total.
But for any new loans taken out as of Wednesday, borrowers will have just two repayment options, down from the previous seven.
With the Tiered Standard Plan, monthly repayments will be spread somewhere between 10 to 25 years, depending on the size of the balance. The previous version of the standard plan spread payments over 10 years, regardless of how much the borrower owed.
With the Repayment Assistance Plan, or RAP, monthly payments are based on income at the time borrowers start repayment. It requires 30 years of monthly payments before the debt can be forgiven. This is now the only plan that can eventually forgive the debt.
If you are planning on going into public service, you can still qualify for the Public Service Loan Forgiveness program after 10 years of monthly payments. This option is only available through the RAP.
I'm an undergraduate and already have federal student loans
If you took out your federal student loans before Wednesday, you have until June 30, 2028, to switch to one of the new options. You will be able to use most of the old repayment plans in the meantime but should check with your loan servicer to avoid confusion.
One exception is if you are enrolled in the Saving on a Valuable Education repayment plan, a Biden-era plan that had especially forgiving terms. The plan was struck down by a federal court, and borrowers who were using it have 90 days after Wednesday to transition into one of the two new repayment plans.
Write to Elyse Goncalves at elyse.goncalves@wsj.com