Big changes are coming to federal student loans. The One Big Beautiful Bill (OB3) passed on July 4, 2025, and it's shaking up how students and parents pay for college. If you're planning for college, or graduate or professional programs, these changes could affect your funding options. If you're a current student, you may not feel the impacts right away.
The biggest impact? Federal loan limits have changed. This means many students might need to look at private student loans to fill the gap. Let's break down what's changing and what it means for you.
New Federal Student Loan Limits
Starting July 1, 2026, borrowing money for college will look very different. The federal government has put new limits on how much certain students or parents can borrow.
Parent PLUS Loan Changes
Your parents used to be able to borrow up to your full cost of attendance through Parent PLUS Loans. Not anymore. Here's what's changing:
Annual limits:
- Parents can only borrow $20,000 per year for each child.
- You, a student, can only receive $20,000 per year in Parent PLUS Loans.
Lifetime limits:
- Parents can only borrow $65,000 total for each child.
- You, a student, can only receive $65,000 total in Parent PLUS Loans.
Graduate and Professional Student Loan Changes
Direct PLUS Loans for graduate or professional students have been eliminated. And loan limits for graduate or professional students, have changed quite a bit.
Graduate students can only borrow $20,500 per year in Direct Unsubsidized Loans with an aggregate limit of $100,000.
Professional students can only borrow $50,000 per year in Direct Unsubsidized Loans with an aggregate limit of $200,000.
All students:
- Total lifetime cap across all programs is $257,500.
Undergraduate Loan Limits Stay the Same
Current and future undergrads — your federal student loan limits haven't technically changed. But schools can now set their own loan limits for certain programs.
Prorating Loans Based on Enrollment
Effective as of July 4, 2025, if you're enrolled less than half-time, your loans will be reduced based on your enrollment.
Grandfathering Rules
If you're already in school, you will have legacy terms, meaning, existing rules will apply until you complete your program or for three years, whichever comes first.
- If you borrowed in the 2025-2026 school year, you could keep borrowing based on current annual and aggregate loan limits. However, if you are not enrolled full-time in your program, you may see your loans prorated.
- This applies to both graduate students and parents who took out PLUS Loans.
Why These Changes Matter
The Graduate PLUS Loan program only started in 2006. It let graduate students borrow up to their full cost of attendance minus other aid received with no lifetime limits. This helped students afford expensive programs like medical school or law school that lead to high-paying careers.
But it also let some students take high debt in fields that may not offer the same type of financial stability as medical or legal careers. The lack of loan limits in the PLUS Loan programs has been a criticism for years.
These changes mean:
- Graduate or professional school might become harder to afford.
- Some programs might see fewer students.
- Schools might need to offer more financial aid for graduate students.
- More students will need private loans.
Will Private Student Loans Fill the Gap?
Private student loans could help some students, but they're not available to everyone. Unlike federal loans, private loans require you (and your cosigner, if applicable) to qualify for the loan. Private student loan lenders will typically require strong credit, job history, and a review of your debt-to-income ratio.
While lenders may offer competitive rates against the federal student loan market, it doesn't mean that all students will be able to qualify for private funding.
New Repayment Plans
The changes don't stop at borrowing limits, federal student loan repayment options are being overhauled quite a bit.
The SAVE Plan is about gone, and most income-driven repayment plans are being sunset.
Here's what's happening:
If you're already repaying loans:
- You can keep your current plan for now: 10-year Standard, Graduated, Extended, IBR, ICR, PAYE.
- ICR and PAYE plans end on July 1, 2028, and will require borrowers to switch to a new plan by July 1, 2028.
- IBR is removing the requirement of a partial financial hardship to qualify, and that is technically effective right now - but we are still waiting for the U.S. Department of Education to implement.
If you borrow after July 1, 2026:
- You must use the Repayment Assistance Plan (RAP) or the new Standard Plan
- The Standard Plan is no longer fixed at 10 years — your repayment term depends on how much you owe.
- Even current borrowers, if you borrow a new federal student loan on or after July 1, 2026, you will be required to pay under RAP or the new Standard and you will lose eligibility for your current plan.
What This Means for You
Depending on the type of student you are, and if you're enrolled in college, this can mean many things.
If You're a High School Student
Start planning now based on the rules that will apply to you. Consider:
- Choosing affordable undergraduate programs for you and your family.
- Have an honest conversation with your parents about their ability to help you pay for school.
- Inform your parents about how the federal student loan programs will work when you start school.
If You're a Current College Student
You may not be affected by these changes, but you should be aware of them. If it will take you more than three years to complete your program, you will be subject to the new rules at that point.
If you're an undergraduate student, you should consider how these changes may impact your ability to cover the costs of a graduate or professional program.
If You're a Parent
If you have a student starting college next year in the 2026-2027 academic year, you need to consider how PLUS Loan limits may impact your ability to cover the financial aid gap. The $20,000 annual limit might not cover your child's full college costs. Start creating a budget and plan to cover the college expenses of your child.
- Saving to help cover the costs of college.
- Potential need for private loans
- Helping your child choose financially realistic schools.
Private Student Loan Outlook
We anticipate an increase in demand for private student loans, but this doesn’t necessarily mean lenders will loosen their approval criteria. While some lenders may expand programs to help upperclassmen complete their degrees, they are likely to focus on students in high-earning majors.
We may also see states developing loan programs to support local students or those attending in-state colleges. However, these programs might take time to roll out and may not be available immediately, especially as funding needs shift with OB3. Not all students will qualify for private loans, so the accessibility of these options will vary.
Planning Your College Strategy
These changes make planning more important than ever. Here's what you should do:
- Research thoroughly: Understand the total cost of your program and how you'll pay for it.
- Consider alternatives: Look for schools with better financial aid or lower costs.
- Build good credit: If you might need private student loans, start building credit early.
- Don't overborrow: With lifetime limits in place, every dollar you borrow counts toward your cap.
- Talk to your family: Make sure everyone understands the new rules and limits. And parents, you need to be honest with your child about expectations on what you can contribute toward their education.
These changes to federal student loans will affect how students pay for college for years to come. While the new rules might seem overwhelming, understanding them early gives you an advantage.
Start planning now. Research your options, talk to financial aid counselors, and make informed decisions about your education funding. The students who adapt to these changes earliest will be best positioned for success.
Remember, these limits don't take full effect until July 2026, but the impact on your planning should start today.