Updated on July 25, 2025 by David Korpel
1. Graduate and Professional Student Loan Caps
Current Law:
- No aggregate federal borrowing cap.
- Graduate and Professional students can borrow up to the cost of attendance through Grad PLUS loans, in addition to $20,500 or less in Unsubsidized Stafford loans.
New Law:
- Annual cap: $20,500 for graduate students; $50,000 for law, medical, and other designated professional programs.
- Lifetime limits: $100,000 for general graduate and $200,000 for professional/law/medical students.
- Grad PLUS loans are eliminated for new borrowers; only Stafford remains.
What It Means:
Federal borrowing for graduate and professional students is now strictly limited. Students in long or high-cost programs (especially medicine, law, MBAs) may find their federal resources exhausted before graduation, pushing them toward private loans or requiring personal/family resources. This could reduce access to expensive programs for students without significant outside support, increasing the financial risk and burden on future professionals.
2. Parent PLUS Loan Limits
Current Law:
- No specific federal cap for Parent PLUS loans (can borrow up to the full cost of attendance minus financial aid).
New Law:
- Annual cap: $20,000 per student.
- Lifetime cap: $65,000 per student.
- Applies prospectively for Parent PLUS loans made after the implementation date.
What It Means:
Parents are now restricted from borrowing unlimited amounts under Parent PLUS. This introduces clearer boundaries, but means families seeking to cover large funding gaps must look to personal savings or private loans. Middle- and lower-income families—who often rely on Parent PLUS for the difference between aid and costs—may have to reconsider college choices or seek more scholarships.
3. Aggregate Federal Student Loan Cap
Current Law:
- No lifetime borrowing limit on federal student loans for individual borrowers (other than annual and program-specific limits).
New Law:
- Maximum total federal borrowing: $257,500 per borrower (not counting Parent PLUS).
- Applies to loans disbursed after effective date.
What It Means:
There is now a strict, federal lifetime total cap. Students with multiple degrees or those who change majors or careers may hit this maximum, losing access to federal loans for additional education. Borrowers and families must plan more strategically to avoid exhausting eligibility before finishing a credential that will provide sufficient earnings.
4. Repayment Plan Changes
Current Law:
- Multiple options: Standard (10 years), Extended (25 years), multiple Income-Driven Repayment (IDR) plans (PAYE, REPAYE/SAVE, IBR, ICR), plus PSLF eligibility for qualifying public/nonprofit work.
New Law:
- Only two options for new borrowers: Standard Repayment (10–25 years) or Repayment Assistance Plan (RAP), which forgives after 30 years but is less generous than current IDR/SAVE.
- All new borrowers limited to these plans beginning July 1, 2026; existing borrowers transitioned to less generous terms by 2028.
What It Means:
Repayment will be simpler—but less flexible and less generous for many. New borrowers lose access to the highly subsidized SAVE and PAYE plans, making it harder to keep payments manageable on large loan balances or low early-career income. Forgiveness will take longer and result in higher total payments, especially affecting low-earning professionals.
5. Deferment and Forbearance Restrictions
Current Law:
- Broad access to forbearance and deferment for hardship, unemployment, grad school, and certain other conditions.
New Law:
- Fewer types of deferments/forbearances are available; eligibility is stricter (e.g., economic hardship will require more documentation); maximum durations are limited.
What It Means:
Federal loans will be harder to pause during tough times. For new borrowers, there is increased risk of falling behind or defaulting if financial hardship strikes, since options to temporarily stop payments are narrower and more bureaucratic.
6. Loan Rehabilitation
Current Law:
- Federal student loan borrowers can rehabilitate a defaulted loan only once.
New Law:
- Borrowers are permitted to rehabilitate a federal loan twice over their lifetime.
What It Means:
This gives borrowers a second chance to get out of default and restore access to federal benefits and positive credit reporting, supporting those who face repeated hardship during repayment.
7. Pell Grant Changes
Current Law:
- Maximum Pell Grant is awarded for enrollment in at least 12 credits per semester (half-time or more).
- Pell can only be used at accredited, degree-granting programs.
New Law:
- Maximum grant now requires enrollment in 15 credits per semester.
- Grant eligibility expanded to include short-term job training programs (excluding non-accredited programs).
What It Means:
Students will need to take heavier course loads each term to receive the largest Pell grant, potentially disadvantaging part-time or working students. However, more job training programs are now Pell-eligible, offering pathways for those seeking rapid workforce entry.
8. Parent PLUS & PSLF/IDR
Current Law:
- Parent PLUS loans are eligible for Public Service Loan Forgiveness (PSLF) and income-driven repayment (after consolidation).
New Law:
- Parents who take out PLUS loans after July 1, 2026, are not eligible for PSLF or any new IDR plan.
What It Means:
Parents taking out new PLUS loans for their children after this date will lose access to the most important safety net options for unaffordable debt. This raises the financial risk to parents, especially if repayment becomes difficult.
9. Program Quality/Earnings Test
Current Law:
- No federal earnings or “gainful employment” test for most degree programs (except for-profit/certificate programs).
New Law:
- All programs (except non-degree certificates) must meet a federal earnings test or lose access to federal student loans.
- Program graduates’ median earnings must exceed a threshold to remain eligible.
What It Means:
Programs with poor employment or salary outcomes risk losing access to federal student aid. This protects students from borrowing for low-value degrees, but could also limit options at non-traditional colleges or for lower-paying fields.
These nine new provisions fundamentally reshape federal student and parent lending. The new laws set hard caps on how much students and parents can borrow, restrict access to flexible repayment and deferment, and tie program access to actual graduate earnings. Existing programs remain for borrowers who already have loans, but families and future students planning ahead will need to be far more strategic, as risk and responsibility are increasingly shifted away from the government and toward individuals.
