Major Student Loan Limits Set To Take Effect, With Big Implications For Borrowing

The Department of Education is forging ahead with significant changes to the federal student loan system that will limit the ability of prospective students enrolling in college and graduate programs to finance their degree. Advocacy groups warned that the new limitations, which will take effect starting next year, may force many Americans to turn to riskier private student loans or abandon higher education entirely.

The new student loan limits stem from provisions of the One Big, Beautiful Bill Act, or OBBBA. The Department of Education completed negotiated rulemaking earlier this month to enact new regulations under the OBBBA governing the disbursements of federal student loans for borrowers who complete the FAFSA, or Free Application for Federal Student Aid. Under the new rules, entire loan programs will be eliminated or capped, and prospective students and their families will have more limited borrowing options. The changes are set to take effect starting on July 1, 2026.

Here’s a breakdown of the new student loan limits, and what it means for college and graduate school students.

Elimination Of Federal Graduate Student Loan Program Available Through FAFSA

The OBBBA makes massive changes to graduate school borrowing by eliminating the Graduate PLUS program for new borrowers starting on July 1, 2026. The Graduate PLUS program is a federal student loan program available to those completing the FAFSA, and is designed for students enrolling in graduate or professional programs like a master’s degree program, or law school or medical school. Until now, students could borrow up to the cost of their graduate school education via the Graduate PLUS program, avoiding any need for private student loans.

The OBBBA “eliminates the current Graduate PLUS program, which allows students to borrow up to the full cost of attendance,” said The Institute for College Access and Success, or TICAS, in a blog post earlier this month summarizing the negotiated rulemaking outcomes.

Advocates have expressed concerns that the elimination of the Graduate PLUS program could push prospective students away from federal student loans made available through the FAFSA (which tend to have more flexible repayment options and access to student loan forgiveness programs) and instead into riskier private student loans, which tend to have higher interest rates and far less repayment flexibility.

“Over 440,000 graduate students each year could be forced to turn to private loans due to the elimination of the Graduate PLUS loan program, and the average Graduate PLUS borrower who replaces their entire loan with a private market option would pay an additional $10,885 in interest,” said Protect Borrowers, a student loan borrower advocacy group, in a statement in September.

Limits On Student Loan Borrowing Under FAFSA For Graduate And Professional Programs

To compensate for the loss of the Graduate PLUS program, the OBBBA allows for additional federal student loan borrowing under the FAFSA for graduate and professional students through the Direct Stafford loan program. But the bill imposes strict limits on borrowing set at $20,500 per year for graduate students, and $50,000 per year for professional students. The OBBBA also imposes a new lifetime borrowing limit of $100,000 for graduate students, and a $200,000 lifetime borrowing limit for professional students.

Given the significant differences in annual and lifetime caps between “graduate” students and “professional” students, the definition of these terms became a major focus of the Department of Education’s negotiated rulemaking session.

“Because professional programs will have access to more than twice the annual loan limits of graduate programs, defining ‘professional student’ emerged as a central debate, particularly for the negotiators representing institutions,” said TICAS in the blog post.

The Department of Education initially proposed that 10 fields of study be included in the “professional” designation. These include: Pharmacy, Dentistry, Veterinary Medicine, Chiropractic, Law, Medicine, Optometry, Osteopathic Medicine, Podiatry, and Theology. Negotiators on the committee pushed to include additional designations under the “professional” umbrella, such as clinical psychology and nursing. The Education Department resisted expanding the definition, but the committee ultimatley agreed to compromise language.

“In response to concerns from negotiators representing public and private nonprofit institutions, the Department proposed compromise language that limits professional programs to those with the same four-digit CIP code as the ten programs listed in statute, plus clinical psychology Psy.D. and Ph.D. programs,” said TICAS. “Using four-digit CIP codes would broaden the types of professional programs eligible for higher loan limits beyond those listed explicitly in statute but still narrows eligible programs more significantly than under the two-digit CIP code proposal offered by the taxpayer negotiator.”

Notably absent from the umbrella of professional programs is nursing, however. This drew protests from nursing advocates.

“Limiting nurses’ access to funding for graduate education threatens the very foundation of patient care,” Jennifer Mensik, president of the American Nurses Association, said in a statement last week.”

Limits On Parent PLUS Borrowing For Undergraduate Student Loan Borrowers

The OBBBA will also place new limits on the Parent PLUS program. Parent PLUS loans are a type of student loan issued to the parent of an undergraduate student loan to fund their college education. The parent, not the student child, is the borrower for these loans and is legally responsible for their repayment, even though it is the student child who benefits from it. Starting on July 1, 2026, the OBBBA imposes new caps on Parent PLUS borrowing.

“The current program allows parents of dependent undergraduates to borrow up to the full cost of attendance each year,” explained TICAS, similar to how the Graduate PLUS program has worked for graduate and professional students. “Effective July 1, 2026, the law imposes limits on the Parent PLUS program of $20,000 per year for each dependent student, with a lifetime limit of $65,000 per student. However, ED proposed exempting borrowers from this new limit if a parent borrower or student themselves received a Direct Loan for enrollment ‘in a program of study’ as of June 30, 2026.”

There was debate during negotiated rulemaking about the scope of this “program of study” exception.

“Negotiators representing taxpayers and state officials questioned whether ‘program of study’ referred to the type of degree or credential (e.g., Bachelor of Arts, Master of Science) or the specific field of study or major (e.g., English, economics),” said TICAS in its analysis. “Narrowing ‘program of study’ to mean a student’s field of study would cause Parent PLUS borrowers to lose access to the higher loan limits if a student who was enrolled on or before June 30, 2026, changed their major.”

After debate during the rulemaking committee’s hearing, the Department of Education ultimately “accepted a proposal from the student loan servicer negotiators that defined ‘program of study’ as academic major when institutions set lower loan limits for particular programs,” said TICAS. “Narrowly defining ‘program of study’ for the purposes of institutional loan limits will allow colleges to set limits based on specific majors rather than for entire credentials, while the broader interpretation applied for the PLUS loan limit exemption will protect borrowers with existing PLUS loans who change their majors from losing access to higher loan amounts.”

Restrictions On Repayment Options For Student Loan Borrowers With Parent PLUS Loans

All Parent PLUS borrowers should be aware of new limits imposed by the OBBBA on repayment options. Starting on July 1, 2026, any borrower who takes out a new Parent PLUS loan will be barred from enrolling that loan in any income-driven repayment plan. This also would effectively bar these loans from qualifying for student loan forgiveness.

Furthermore, taking out any student loan (Parent PLUS or otherwise) on or after July 1, 2026 will also cause any existing student loans to lose eligibility for the Income-Based Repayment, or IBR plan, and therefore any possibility of 25-year student loan forgiveness. Non-Parent PLUS Direct federal student loans would only qualify for the new Repayment Assistance Plan, or RAP, created under the OBBBA, which will have a 30-year repayment term for loan forgiveness. The bill creates only a narrow pathway for current Parent PLUS borrowers to maintain eligibility for income-driven repayment and student loan forgiveness.

“Only Parent PLUS borrowers that consolidate their loans before July 1, 2026 and are enrolled in any IDR plan between now and July 1, 2028 will be eligible for an income-driven repayment plan after the SAVE, ICR, and PAYE plans are eliminated on or before July 1, 2028,” said the National Consumer Law Center in an analysis for the OBBBA earlier this year. “Those borrowers will be eligible for the Income-Based Repayment (IBR) plan. They will not be eligible for RAP. Existing Parent PLUS borrowers who do not jump through these hoops in time will be locked out of income-driven repayment options, which could make it very difficult to manage their loans if they cannot afford fixed payments.”

Ultimately, prospective students and their families looking to finance an undergraduate or graduate degree through federal student loans authorized through the FAFSA process should very carefully evaluate the new limits and restrictions imposed under the OBBBA and the Department of Education’s new regulations that are in the process of being finalized. In addition to capping or eliminating loan programs, the reforms may also limit access to affordable repayment plans and student loan forgiveness options. Undergraduate, graduate, and professional students, and especially parents, should all tread carefully.