Education Department revamps student loans, cuts graduate borrowing limits

Graduate and professional students lost access to Grad PLUS borrowing when new federal student-loan rules took effect July 1. The U.S. Department of Education published the final regulations on May 1 to carry out the student-loan provisions of the Working Families Tax Cuts Act, and the overhaul reaches both borrowing limits and repayment terms.

Graduate and professional students represented 16.8% of borrowers in 2024-25 but received 46.6% of total loan disbursements. Graduate and professional students now face new annual and aggregate federal loan limits. For families that once used federal borrowing to close the gap between tuition, fees and living expenses, the new caps will push more of that gap onto savings, cheaper schools or private debt.

A March 10 court order ended SAVE and forced borrowers in SAVE-related forbearance to move to another repayment option. Borrowers with loans made on or after July 1, 2026, will get access to a new Repayment Assistance Plan. Borrowers in older, phased-out plans with loans made before that date have until July 1, 2028, to choose among the new options, including the Repayment Assistance Plan, the Tiered Standard plan or income-based repayment. Involuntary collections, including wage garnishment and Treasury offsets, are delayed while the system shifts to the new rules.

A parent with two dependents could see $100 trimmed from a monthly bill under the new repayment plan’s $50-per-dependent reduction, and eligible Direct Loan borrowers enrolled in auto pay will get a larger interest rate reduction, 1% instead of 0.25%, beginning July 1. Borrowers who enroll in auto pay by September 30, 2026, can keep that benefit through June 30, 2028.