New Rules Place Limits on Student Loan Disbursement and Repayment Options

The Education Department released finalized new regulations last week that will impose substantial new limits on student loan borrowing, while also making significant changes to student loan repayment.The new rules, which will go into effect on July 1, represent the final stage in the department’s efforts to implement the changes outlined in the One Big, Beautiful Bill Act (OBBBA) that Republican lawmakers in Congress and President Trump enacted last year.“Collectively, these changes will ensure students continue to have access to federal student loans while helping prevent borrowers from taking on unmanageable debt levels they may never be able to repay,” said the Education Department in a statement last Thursday.“The final rule also saves American taxpayers $409 billion by simplifying student loan repayment, eliminating excessive, illegal loan forgiveness schemes, and reducing student loan debt by $224 billion by protecting students from overborrowing.” But critics argued that the new limits on student loans would prevent many Americans from accessing affordable education, or force them to turn to costly and riskier private student loans.

And student loan borrower advocacy groups warned that the changes to federal student loan repayment plans would saddle many borrowers with higher monthly payments as many Americans struggle with cost of living increases.“At a time when the student loan system is already in crisis, President Trump’s Department of Education has finalized yet another limitation on student loans that will hurt current and future borrowers,” said Alex Lundrigan, Higher Education and Workforce Policy and Advocacy Manager for Young Invincibles, in a statement last week following the department’s rollout of the final regulations.“Cutting the limits on graduate loans in half will not lower the cost of college, it will just put graduate programs out of reach for anyone who is not already wealthy.Pushing graduate students to private loan markets will just leave more students vulnerable to corporate whims without the protections of federal student loans.” Here’s what the new regulations will do, and what student loan borrowers and prospective students should know.

New Borrowing Limits for Student Loans The regulations make substantial changes to how Americans will pay for their college education and for graduate degrees.In particular, the rules will change federal student loan programs and impose new caps on borrowing.“The amended regulations cap federal student loan borrowing for both graduate and professional students, as well as cap loans for parents who borrow on behalf of dependent undergraduates,” said the Education Department in a fact sheet explaining the new rules.“Beginning on or after July 1, 2026: Graduate student loans are capped annually at $20,500, with an aggregate cap of $100,000; Professional student loans are capped annually at $50,000, with an aggregate cap of $200,000; for the first time, Parent PLUS borrowers are capped annually at $20,000, with an aggregate cap of $65,000 per dependent; All borrowers who receive a loan made on or after July 1, 2026, are subject to an aggregate lifetime loan limit of $257,500.” There will be limited exceptions to these borrowing caps for borrowers already enrolled in a degree program before July 1, 2026, and who have already received a federal student loan for that program.

“Under this exception, borrowers may continue borrowing under the prior (pre-Act) annual, aggregate, and lifetime loan limits for the lesser of three years or their expected time to credential (defined as the period determined by subtracting from the program length the portion of the program the borrower has already completed), provided that they remain continuously enrolled,” says the fact sheet.“If a borrower ceases enrollment or withdraws from the program, they will no longer qualify for the interim exception and will instead be subject to the new annual, aggregate, and lifetime loan limits.” Changes to Definition of Professional Students for Student Loan Borrowing Purposes The proposed regulations draw a line between a “graduate” degree program and a “professional” degree program, allowing for higher borrowing limits for professional degree programs.“Congress required the Department to use a narrow and limited definition to determine which postbaccalaureate programs would be eligible for higher loan limits for “professional students,” said the Education Department in the fact sheet.“Building on the statutory definition contained in the Act, the Department arrived at the definition contained within the final rule, which achieved consensus among the all stakeholders represented during negotiated rulemaking.” But some critics have argued that the narrower definition of a “professional” degree program will effectively prevent prospective students from enrolling in certain high-cost, high-need programs such as nursing, which was one of several professions excluded from the “professional degree” category, since the borrowing caps may prevent people from financing their degree entirely through federal student aid.

Prospective students will face a stark choice to either turn to costly and risker private student loans (which don’t qualify for programs like income-driven repayment or Public Service Loan Forgiveness), or forego the degree entirely.“AANA is deeply concerned by the consequences of the U.S.Department of Education’s decision to limit federal student loan access for Certified Registered Nurse Anesthetists (CRNAs) and other advanced practice nursing degrees,” said American Association of Nurse Anesthesiology President Jeff Molter in a statement last week.“This policy will have real and damaging effects at a time when demand for care is growing nationwide… Patients will ultimately bear the consequences of this policy as it constricts the anesthesia workforce pipeline, resulting in decreased access and longer delays for essential procedures such as cancer screenings, childbirth, and surgery.

These impacts will be felt most acutely in rural and underserved communities where CRNAs are often the primary or sole anesthesia providers.The Department’s final rule moves us in the wrong direction and reverses the Administration’s prior recognition of the essential role CRNAs play in delivering safe, high-quality anesthesia care.” Changes to Student Loan Repayment The regulations also make changes to federal student loan repayment as the SAVE plan is terminated, the PAYE and ICR plans are phased out by July 2028, and the Education Department prepares to launch the new Repayment Assistance Plan (RAP) this summer.The IBR plan will remain intact for current borrowers, as long as they don’t take out new federal student loans or consolidate their current loans on or after July 1, the date of the enactment of the new rules.“The Act replaces all prior repayment plans with two streamlined options to better support borrowers: the Tiered Standard plan and the Repayment Assistance Plan (RAP),” said the Education Department in the fact sheet.

“These plans will be available to new and current borrowers beginning on July 1, 2026.” “The RAP, a new income-based repayment option, is designed to benefit borrowers by allowing their payments to adjust based on income and family size, meaning borrowers pay more during years when their income is higher and less during years that their income is lower,” continued the department.“Under RAP, some borrowers will see reduced monthly payments compared to existing income-driven repayment plans.The plan also waives unpaid interest for borrowers who make on-time payments that do not fully cover accruing interest.” However, borrowers in RAP will be subject to a 30-year repayment term before they can qualify for student loan forgiveness, far longer than existing IDR options.And the new rules indicate that payments made under RAP will not count toward student loan forgiveness under the other IDR plans, including IBR, representing a significant departure from past practice (although RAP payments will still count toward Public Service Loan Forgiveness).