Overhauled federal student lending rules that took effect July 1 are now being felt on campuses and in household budgets this fall. Grad PLUS loans have ended for new borrowers, new annual and lifetime borrowing limits apply to graduate, professional and parent loans, and new borrowers are steered to a revised set of repayment plans. Critics and supporters disagree about the effects.

What changed on July 1

The changes stem from the 2025 budget reconciliation law, known as the One Big Beautiful Bill Act, and from Department of Education rules finalized this year. Education Secretary Linda McMahon has said taxpayers should no longer pay for other people’s student loans, according to public radio reporting on the changes.

Under the new rules, as summarized by state news outlets, Grad PLUS loans are eliminated for new borrowers. Students who borrowed before July 1 can keep using the program until they finish their course of study or three years pass, whichever comes first.

New borrowing limits

  • Graduate students: $20,500 per year and $100,000 in total.
  • Professional students: $50,000 per year and $200,000 in total.
  • Parent PLUS borrowers: $20,000 per year and $65,000 in total per dependent student.

Professional programs covered by the higher limits include medicine, law, dentistry, pharmacy, veterinary medicine, optometry, osteopathic medicine, podiatry, chiropractic, theology and clinical psychology. Other fields fall under the lower graduate caps. Students whose costs exceed the caps must cover the difference through savings, scholarships, institutional aid or private loans.

Repayment options

New borrowers are offered two repayment plans. The Repayment Assistance Plan, or RAP, is an income-based option. It waives unpaid interest when an on-time payment does not cover accruing interest, and it can reduce principal by up to $50 for each on-time payment, according to the summary. The Tiered Standard Plan sets fixed monthly payments over 10 to 25 years, depending on the loan balance.

Borrowers with existing loans should consult their loan servicer and the Department of Education’s Federal Student Aid website to confirm which plans remain available to them, since eligibility depends on when loans were issued.

Debate over the effects

Advocates for the changes argue that borrowing limits may restrain tuition growth and reduce the risk of borrowers taking on debt they cannot repay. Critics, including The Institute for College Access and Success and EdTrust, have said repayment will cost more for many borrowers and that more students will turn to private lenders, which typically offer fewer protections. Those effects will take time to measure, and early enrollment and lending data for the 2026-27 year have yet to be fully reported.

Graduate and professional schools, particularly those with high tuition, such as medical and law schools, are expected to watch how the caps affect enrollment and financial aid packaging. Some institutions have said they may expand scholarships or work with private lenders, though plans vary and details have not been widely published.

Collections and the broader system

Separately, the Treasury Department will take over collection of defaulted federal student loans, described by one report as a first step toward moving a larger portion of the loan portfolio there. The average federal student loan balance is $39,547, according to the same report. Defaulted borrowers can face wage garnishment and offsets of tax refunds and other federal payments, and advocates urge anyone behind on payments to contact their servicer about rehabilitation or consolidation options before default occurs.

What borrowers can do now

  • Log in to studentaid.gov to review loan types, balances and servicers.
  • Compare available repayment plans using the federal loan simulator and confirm eligibility.
  • Students planning graduate school should estimate total costs against the new caps and ask schools about aid.
  • Use only official federal channels for loan help, since scammers often pose as debt-relief companies and charge fees for free services.

What to watch

Observers are watching for further Department of Education guidance, servicer transitions, the Treasury collection transfer and any legal challenges. Because rules have changed repeatedly in recent years, borrowers are advised to rely on official notices and to keep records of all payments and correspondence.

Families and students making decisions for the 2027-28 academic year will be able to see more data on how the caps affected borrowing, which may shape the next round of policy debate in Congress and at the Department of Education.

Sources: Connecticut Public, Michigan Advance, State news summaries of Department of Education rules.