Under President Donald Trump’s One Big Beautiful Bill Act, the Education Department has eliminated the Grad PLUS program, capped Parent PLUS Loans, and consolidated student loan repayment options into a single Repayment Assistance Plan.
More than 42 million Americans owe about $1.7 trillion in student loans, placing the issue at the center of debates about affordability, higher education, and the national workforce.
The Education Department reforms represent the most significant overhaul of the federal student loan system in decades.
They reduce borrowing limits for graduate and parent borrowers, simplify repayment, and revise eligibility for loan forgiveness programs.
The Department finalized the rules after consensus by the Reimagining and Improving Student Education Committee.
Beginning in July 2026, the new Repayment Assistance Plan will take effect, capping graduate student borrowing at $20,500 per year, with a lifetime maximum of $100,000.
Professional students can borrow up to $50,000 per year, capped at $200,000 overall.
Parent PLUS Loans will also face new limits.
Officials said the changes are intended to discourage unsustainable borrowing and reduce tuition inflation.
The department also issued new rules for the Public Service Loan Forgiveness program, excluding employers found to have a “substantial illegal purpose.”
This could apply to organizations involved in prohibited medical services, immigration assistance to undocumented individuals, or entities tied to terrorism-related activities.
The education secretary will have discretion in determining ineligibility based on court rulings, settlements, or other evidence.
Employers may regain PSLF status through corrective action or after 10 years. Borrowers’ prior qualifying payments remain valid.
Four cities, including Boston and Chicago, joined major labor unions in a federal lawsuit challenging the new PSLF criteria, calling them unlawful and harmful to public sector staffing.
In 2022, roughly 9 million borrowers were eligible for PSLF. The Biden administration had expanded access, but the new rules reduce eligibility.
Nicholas Kent, under secretary of education, said the reforms will simplify repayment and pressure universities to lower costs.
Financial educator Alex Beene said students may reconsider degree choices under stricter borrowing limits and fewer forgiveness options.
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