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It is stated that when a Paladin falls from grace and does not repent, they must either become an Oathbreaker or choose a new class, but what exactly happens when they fall from grace? Does the Paladin lose all of his/her powers, or does the loss from grace only mean they are abandoned by their deity or order?

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At the the DM’s discretion, an impenitent paladin might be forced to abandon this class and adopt another, or perhaps to take the Oathbreaker paladin option

I read this as an out-of-character game rule: if your paladin falls, that is, your DM forces you to abandon the paladin class,1 you are required, as a player, to choose either Oathbreaker or some new class for your character. Oathbreaker’s placement in the DMG implies that this option is explicitly available only if your DM offers it.

Either way, you definitely do not have the option of remaining as a (non-Oathbreaker) paladin after you have fallen. You “lose” your powers, of course, since you are no longer a (non-Oathbreaker) paladin, but they are immediately replaced by those of Oathbreaker or your new class, as appropriate.

And when you fall, you are not abandoned by your deity, so much as you have already been abandoned and that is why you have fallen.

  1. As with previous editions (which were far worse about this), I strongly recommend that the narrative for how, when, and why a paladin falls should be worked out between the DM and player to maximize its effect and significance, and limit arguments and hurt feelings over differing definitions and expectations for what “good” entails. 5e does massively improve this process by making it less about morality, and more about keeping a specific oath, and by ensuring the paladin can continue to contribute and play in the game on a metagame level by replacing his powers, but I still consider it important that a fall be done in concert with the player, rather than unilaterally as the rules suggest.
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