On May 1, the Department of Education issued a final rule that overhauls federal graduate student borrowing limits, parental borrowing limits, and replaces current income-driven repayment plans. This regulation, the majority of which will go into effect on July 1, 2026, implements some of the changes that the One Big Beautiful Bill Act (OBBBA) made to federal student aid programs.

What does the regulation change?

The rule implements several statutory changes made to federal student aid programs by the OBBBA, which President Donald Trump (R) signed into law July 4, 2025. It:

• Sets a $257,500 cap across all federal student loans for most borrowers;
• Establishes a $20,000 per year per child and $65,000 lifetime per dependent student borrowing cap for the Parent PLUS program, which allows parents to take out loans for dependents enrolled in undergraduate programs;
• Makes significant changes to graduate and professional student lending, including phasing out the Graduate PLUS loan program, capping lending for graduate student loan programs at $20,500 annually and $100,000 in total, and capping lending for professional students at $50,000 annually and $200,000 in total;
• Defines ‘professional’ programs as those offering degrees in pharmacy, dentistry, veterinary medicine, chiropractic, law, medicine, optometry, osteopathic medicine, podiatry, theology, and clinical psychology;
• And, implements a phase out of some existing income-driven repayment plans, including ICR, PAYE, and SAVE, to be replaced by a new Tiered Standard repayment plan and an income-driven repayment plan called the Repayment Assistance Plan. The Tiered Standard will not qualify for Public Service Loan Forgiveness, while the Repayment Assistance Plan will. Borrowers currently enrolled in ICR, PAYE, or SAVE repayment plans have until July 1, 2028 to transition to a new plan.

Students enrolled in a program who have taken out loans before July 1, 2026, are not subject to the new caps for up to three years or until the completion of their program, whichever comes first.

Reactions

In January, when the Department published its proposed rule, Under Secretary of Education Nicholas Kent said, "With consensus reached in support of the Department's proposed rule, we have a clear path forward to fulfill the President's promise of making higher education more affordable and ensuring that every professional in America — from teachers and nurses to physicians and clergy — can pursue their careers without taking on debt they may never be able to repay."

Critics of the final rule, however, focused on the implications of designating certain professions and degree pathways as "professional."

In Congress, Sen. Jeff Merkley (D-Ore.) and Rep. Jen Kiggans (R-Va.) released a joint statement that said the final rule means "individuals pursuing post-baccalaureate nursing degrees will face lower federal borrowing limits for student loans, creating additional barriers to entering the profession."

The American Association of Colleges for Teacher Education said in a press release that the organization was “strongly dismayed by the U.S. Department of Education’s decision to restrict access to federal student loans for students pursuing degrees in education,” and Waded Cruzado, president of the Association of Public and Land-grant Universities said, "We are profoundly disappointed in the U.S. Department of Education's decision not to expand professional graduate programs eligible for higher loan limits in finalized federal rulemaking."

The text of the final rule said that “the designation, or lack thereof, of a program as ‘professional’ does not reflect a value judgment by the Department... we are only interpreting the term as used in the context of the new loan limits.”

What is the background?

The federal government has been involved in lending for higher education expenses since 1958 when the National Defense Education Act established the first federal higher-education loan program, now known as the Perkins Loan program. The 1965 Higher Education Act created guaranteed loan programs, in which the federal government would guarantee the repayment of a privately-held student loan if the borrower defaulted. 

As of 2026, federal student loan programs make up the majority of student loans in the United States, with 90.9% of all American student loan debt being held by the federal government. In total, the federal government holds $1.693 trillion in federal student loan balances from 42.8 million borrowers.

On March 19, Education Secretary Linda McMahon announced the Department of Education was transferring collection responsibilities for its portfolio of student loans in default to the Department of the Treasury as part of broader plan to move additional student loan responsibilities to Treasury, although a full transfer of the portfolio would require congressional approval.