The U.S. Department of Education on February 20, 2026. (Photo by Shauneen Miranda/States Newsroom)
WASHINGTON – The federal student loan system is undergoing a dramatic overhaul starting this summer, and critics warn it would likely make loans more steep and harder for borrowers to get – turning to private lenders or changing their higher education plans.
Key changes include fresh graduate and professional loan limits, a restructured repayment system that will give fresh borrowers only two plans to choose from, and the elimination of a key graduate and professional loan program that allowed unlimited borrowing.
The provisions – most of which come into force on July 1 – are the result of proposals by Republicans in Congress. Mega bill to cut taxes and spending that President Donald Trump signed the law last year.
The US Department of Education final regulationspublished May 1stimplementing sweeping changes outlined in the Republicans’ “big, beautiful” bill. The department received more than 80,000 public comments before finalizing the rule.
Education Undersecretary Nicholas Kent said during an April 30 call with reporters about the fresh rules that the reforms focus “at a high level” on “reducing college costs, simplifying student loan repayment and restoring accountability to the federal student loan system.”
The average federal student loan debt balance is $39,547 Education Data Initiative.
As July 1 approaches, here’s a closer look at some of the biggest changes affecting the federal student loan system:
Abolition of degrees PLUS
The Grad PLUS program, which allowed graduate students and working professionals to borrow up to the full cost of attendance, will soon be eliminated as part of the package and will no longer be available to fresh borrowers.
“If you are currently taking out Grad PLUS loans, so you took out Grad PLUS loans before July 1, you are allowed to continue using Grad PLUS until you complete your program or until three years are up, basically whichever is earlier,” said Preston Cooper, senior fellow for higher education policy at the American Enterprise Institute, a right-leaning think tank.
“Current students are grandfathered in – starting this fall, after July 1, only new graduate students will be subject to the new loan limits,” Cooper said.
New credit limits
The package also sets fresh annual and total loan limits for graduate and professional students, as well as parents, who take out federal student loans for dependent undergraduate students.
Loans for graduate students are confined to $20,500 per year, with a total limit of $100,000.
Parent PLUS borrowers have an annual limit of $20,000 and an aggregate limit of $65,000 per dependent.
Professional student loans have an annual limit of $50,000 and an aggregate limit of $200,000.
Programs that fall into the department’s “professional” category and are subject to this higher credit limit include: pharmacy, dentistry, veterinary medicine, chiropractic, law, medicine, optometry, osteopathic medicine, podiatry, theology, and clinical psychology.
The department clarified in one Fact sheet to the final regulations that the “professional” student classifications “do not express a value judgment about the importance of a profession or field,” but rather serve a “credit management function.”
The agency has received enormous opposition Groups that represent people In Fields that do not fall under this apply as defined by the Department and are therefore subject to lower annual and lifetime credit limits.
Incoming repayment options
In another significant change, the regulations replace previous repayment options with two fresh plans – the Repaid Assistance Plan (RAP) and the Tiered Standard plan – both of which will launch on July 1.
RAP is an income-driven repayment plan that “waives unpaid interest for borrowers who make on-time payments that do not fully cover accrued interest,” the department says Fact sheet.
Balances under the plan will also “decrease with each on-time payment as unpaid interest is waived in full and the department then reduces the principal balance by an amount equal to the borrower’s payment, up to $50,” the agency said.
The standard tiered plan offers fixed monthly payments lasting 10 to 25 years, depending on the borrower’s outstanding principal balance.
“Much more expensive”
“The result is that loan repayment will become much more expensive for almost everyone, significantly more expensive for some, and the transition will also be difficult for many people to manage,” Michele Zampini, associate vice president for federal policy and advocacy at the Institute for College Access & Success, told States Newsroom.
Zampini, whose organization aims to promote affordability, accountability and equity in higher education, said she believes “there will be many students who will have to turn to the private loan market who would otherwise have been able to cover their costs through the (Grad PLUS) program.”
Victoria Jackson, associate director of higher education policy at the nonprofit policy and advocacy group EdTrust, said that with the fresh loan limits and the “drastic cuts to the availability of aid” in the regulations, “one would really hope that there would be other, more affordable and better forms of financial aid.”
“And what they’ve done is create this vacuum that can really only be filled right now with private loans, which are more expensive and risky for students, or students just won’t go,” Jackson said.
Meanwhile, the Trump administration continues its elimination efforts Ministry of Educationincluding through a series of interagency agreements assigned several of his tasks to other departments.
According to the recent agreement, the Ministry of Finance will assume Education’s responsibility for collecting defaulted federal student loan debt – the first step in a multi-step process to take over Education’s entire federal student loan portfolio of approximately $1.7 trillion from the Treasury Department.
Transition to the fresh system
Zampini noted that when it comes to incoming student loan regulations, she has no confidence in the Department of Education’s “ability to successfully manage the transition without major hiccups as it relates to servicing, account tracking, plan enrollment and the like.”
EdTrust’s Jackson said, “Weakening the federal financial aid system, in my opinion, will weaken our higher education system and make it more difficult for low-income students, students of color and other marginalized students to access postsecondary education.”
She added that “people who complete these degrees tend to have greater financial security in the future – they earn more over their lifetime and do better in terms of financial success and opportunity.”
“I think this is part of a plan to undermine our entire higher education system.”
