Grad School Loan Changes: What Borrowers Need to Know
The federal student loan system is undergoing a major overhaul set to take effect this July, impacting graduate students in particular. President Donald Trump’s One Big Beautiful Bill Act (OBBBA) introduces new rules such as annual and lifetime lending limits, the discontinuation of Grad PLUS loans, revised repayment options, and more. These changes, scheduled to begin on July 1, are expected to have a significant impact on graduate students seeking financial aid for their education.
According to Megan Walter, a senior policy analyst at the National Association of Student Financial Aid Administrators, the upcoming changes represent a significant shift in the graduate lending landscape. While federal officials argue that the new rules aim to curb excessive borrowing and reduce tuition rates, student loan experts and advocates warn that the changes could force many students into private student loan debt and potentially hinder others from pursuing graduate studies.
One of the key changes affecting new graduate students is the elimination of the Grad PLUS lending program, which allowed students to borrow up to the full cost of attendance. With this program ending, the Department of Education’s annual borrowing limit for unsubsidized loans of $20,500 will now be the maximum available, limiting federal borrowing for a typical two-year master’s program to $41,000. Additionally, new lifetime borrowing limits have been introduced, with standard graduate degrees capped at $100,000 in federal loans and professional degrees limited to $257,000.
The Education Department’s strict definition of “professional degrees” has sparked controversy, as it excludes many graduate programs from the higher borrowing limits. This has raised concerns among advanced nursing, accounting, and engineering groups, as their programs often exceed the $100,000 lifetime lending limit.
Current graduate students will also be affected by the changes, particularly in relation to the Grad PLUS program. While the program is ending for new borrowers, current students may qualify for a limited exception allowing them to continue borrowing through Grad PLUS until the completion of their degree or for a maximum of three years. However, this exception is not automatic and requires students to apply before July.
In addition to lending limits, new repayment rules will come into effect for federal student loans taken out on or after July 1. The standard repayment plan will require fixed payments over 10 to 25 years, depending on the loan amount. A new income-driven repayment option called the Repayment Assistance Plan (RAP) will also be introduced, offering monthly payments ranging from 1% to 10% of the borrower’s adjusted gross income.
Overall, the changes to the federal student loan system under the OBBBA will have far-reaching implications for graduate students, affecting borrowing limits, repayment options, and access to financial aid. It is crucial for students to stay informed and seek guidance from their financial aid office to navigate these new regulations effectively.
