Experts Discuss How New Loan Limits Will Impact Students
By Maria Carrasco, NASFAA Staff Reporter
As both institutions and the Department of Education (ED) parse through the rollout of new loan limits set under the One Big Beautiful Bill Act (OBBBA), experts gathered for a panel on Tuesday to discuss what these new loan limits will mean for students and their families.
OBBBA was signed into law in July and created new limits for all federal student loans. Under the law, Parent PLUS loans have a $20,000 per year cap per dependent student and a $65,000 aggregate limit per dependent student (without regard to amounts forgiven, repaid, canceled, or discharged). These provisions are set to become effective on July 1, 2026.
Additionally, the Graduate PLUS loan program will be eliminated, effective July 1, 2026, with legacy provisions for current borrowers to complete their program of study. The law caps the annual graduate loan limits at $20,500 for graduate students and $50,000 for professional students. The aggregate limit is capped at $100,000 for graduate students and $200,000 for professional students.
The law also created a lifetime borrowing cap of $257,500 on all federal loans, excluding borrowed Parent PLUS loan amounts. Currently, ED is working on implementing these provisions through the negotiated rulemaking process, which included much discussion on the definition of graduate and professional students and programs.
To talk through how these provisions will be implemented, along with the history and current federal student loan portfolio, the Brookings Institution convened a panel of higher education experts with Justin Draeger of the Strada Education Foundation, Jordan Matsudaira of American University, and Sarah Turner of the University of Virginia to discuss this changing landscape.
The discussion began with a question from moderator Sarah Reber, of Brookings Institution, on why Congress decided to limit loans for students. Matsudaira said these limits could serve as a safeguard to protect students from overspending on a credential, while also protecting taxpayers.
The conversation focused particularly on how these loan limits will impact graduate students, since the Graduate PLUS loan program will be eliminated, and these new loan limits could push some students to the private market. Turner noted that the graduate students who could be most impacted by these new loan limits are students in health programs, such as dentistry, as well as students in education programs.
Reber asked Draeger if these loan limits could pose any unintended consequences for students. Draeger noted that the Graduate PLUS loan program has been problematic since it allowed some students to borrow up to the full cost of attendance.
“You'd have to almost be willfully deaf to the policy conversations to not see that a lot of folks were raising alarm bells about Graduate PLUS loans not having loan limits,” Draeger said. “Now, I think you could also say that whether this particular piece of legislation got those limits exactly right [is a] fair debate.”
While there may be some unintended consequences with the enactment of OBBBA, Draeger said there should be loan limits for graduate borrowing as part of its program design to mitigate risks for taxpayers, students, and everyone else involved. He noted that while graduate students roughly represent 15% of all students, graduate students account for nearly 40% to 50% of all loans dispersed every year.
“Things just got a little out of whack and are there unintended consequences with these loan limits, absolutely,” Draeger said. “But again, I just go back to program design that requires reasonable loan limits in federal loan borrowing.”
Turner and Draeger both talked about the unintended consequences of OBBBA and how this could negatively impact low-income borrowers, or borrowers in fields such as social work or public health.
Draeger noted that graduate students previously lost access to subsidized loans and have taken the bulk of almost all student aid cuts. He added that there are still questions to be answered in how the government invests in graduate education, and noted that state funding of graduate programs could be a solution to these consequences.
Turner noted that many low-income students may be shut out altogether from enrolling in graduate education since some won’t have a parent who can co-sign a private loan. Turner later added that students who will struggle with these loan limits are likely to be Pell-eligible and from minority groups.
“There's a real risk that essentially the loan limits may constrain really talented, low-income young adults from investing in graduate programs that could have huge impacts on their long term incomes,” Turner said.
Publication Date: 10/16/2025
Kelly R | 11/4/2025 11:33:44 AM
My concern is that policy makers "listed" approved and unapproved careers/professions that would be covered by graduate school loans with a viability economics test informing their decisions. The problem with this is that public serving professions that take a high level of skill, expertise, and content knowledge (such as teachers, behavioral health therapists, etc.) were not considered for the larger cap -- and they were limited to $20K. $20 does not pay for a master's degree -- many of which are tied to national teacher accreditation, or to state-wide requirements for behavioral health provideers.
Linzy W | 10/20/2025 11:32:51 AM
Thank you for mentioning associate programs, Kristi. As a Financial Aid Counselor at an affordable college, it's so painful to watch people max out their lifetime eligibility on associate degrees. While the annual loan limit feels somewhat reasonable at my school, the lifetime limit should be much lower.
I was horrified by a recent report on the default rates of junior colleges and trade schools. I truly don't think we're helping students by allowing them to use up their eligibility on two year degrees. Lowering the aggregate limit for schools like mine would be a quick way to reduce the default rate. It may also decrease "legal fraud" committed by technically degree seeking students who do not intend to use their degree toward a career.
Sandra A | 10/16/2025 12:29:23 PM
When deciding how much students should be able to borrow it is important to consider that the amounts students borrow for graduate/professional school include amounts for living expenses. Schools do not have control over how much rent is, food costs, gas costs, child care... All costs that have been consistently rising year after year. These are adult students who may not have family support or family that is not able to help them with these costs or have families of their own that they need to support. Cost of living differs greatly from state to state, so what would be a equitable "cap". Also, there are programs, such as medical school, that are very rigorous and do not allow time for students to work and earn money to cover their expenses. They have to be able to meet their needs somehow.
Kristi E | 10/16/2025 8:30:50 AM
As a former director at both a private school and an institution with a graduate program, I understand that the proposed limits will make it difficult for some programs to remain viable without the Grad PLUS loan.
That said, if there’s a cap on funding for bachelor’s degrees, shouldn’t the same apply to associate degrees? I’ve seen students reach their lifetime undergraduate loan limit while pursuing an associate degree, or after working toward a second or even third associate degree. This raises concerns about how the limits are applied across different degree levels.
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