The Era of Easy Federal Student Loans Is Ending

What Happened?

Starting July 1st, 2026, graduate students will face new federal borrowing limits under President Trump’s One Big Beautiful Bill Act. The biggest change is the elimination of Grad PLUS loans, which currently let graduate students borrow up to the full cost of attendance after other aid is applied.

Under the new rules, most graduate students will be limited to $20,500 in federal loans per year. Students in professional degree programs, including law and dentistry, will be able to borrow up to $50,000 per year, which may not cover tuition, fees, housing, books, and living costs at many expensive programs.

Private lenders are already preparing for more demand. Companies including Navient and SoFi have told Congress they expect more borrowers to seek private student loans once federal options are capped. Higher education expert Mark Kantrowitz estimated private student loan volume could double from its current level of about $10 billion per year.

The Trump administration believes that unlimited Grad PLUS borrowing helped drive up graduate school tuition, a view supported by various studies. Consumer advocates warn that the private market will not approve everyone who loses access to federal money, which will likely affect attendance in these programs starting as soon as this fall.

Why It Matters

Federal loans were built around access, while private loans were built around risk. So while federal loans approve everyone, regardless of income or credit, private lenders are likely to look more closely at credit scores, income, debt levels, and whether a borrower has a cosigner…

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According to an analysis by consumer advocacy group Protect Borrowers, more than 40% of Americans could be denied most private student loans from traditional lenders due to credit and income requirements. Many lenders require a credit score of at least 670 and an income of around $35,000. That may pose problems for students straight out of college, especially given that the average credit score for people in their 20s is 662.

Interest rates are another variable. While current federal student loan rates range from 6.39% to 8.94%, private student loans can reach as high as 23%. A borrower who cannot get a strong rate may pay thousands more over the life of the loan. Private loans also come with fewer protections.

Federal loans offer income-based repayment, disability discharge, fraud-related forgiveness, and death discharge, while private loan forgiveness is rare, and only about half of private lenders discharge debt when a borrower dies or becomes disabled.

How It Affects You

For anyone attending or planning to attend grad school after July of this year, the assumption that federal loans will cover the full cost is unlikely. A master’s student may be able to borrow only $20,500 per year from the federal government, while a law, dental, or other professional student may be capped at $50,000 per year. Anything above that may require savings, scholarships, employer help, or private loans.

Parents and grandparents are also likely to face more pressure to cosign. Most young borrowers lack long credit histories, so private lenders often require another person legally tied to the loan. If the student falls behind, the cosigner can be pursued for payment. But that risk can follow families for years. Private student loans often run 10 to 15 years. For an older cosigner, that debt could overlap with retirement, reduced income, medical expenses, or reliance on Social Security.

Students may be forced to make harder choices about schools and degrees. A high-cost program with weak earnings potential will be tougher to finance privately. Acceptance into these programs becomes a bit less of a concern, as affording it and supporting the debt under private lending terms adds a new layer to higher education plans.

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