With the educational system in the U.S. seemingly being overhauled, those who are looking to further their education likely have a lot of questions when it comes to loans and financial aid. Thanks to recent legislation, there could be more roadblocks to obtaining federal money to help finance a degree or career certification. Not sure what this could mean for you? Find out more about the new student loan caps and adjustments to Pell Grants, as well as when the changes are set to go into effect.
Why are changes being made to student loans and grants?
On July 4, 2025, President Donald Trump signed the “Big Beautiful Bill” into law. As part of this legislation, the student loan process is undergoing some major changes in the Department of Education, ranging from repayment plans to new borrowing policies.
Now, both students and parents will have a cap on how much money they can borrow or receive from the federal government for post-secondary education.
The goal behind this new change is to try and make college more affordable in the long run. “If you allow more money to be borrowed, schools just raise their tuition more, and that’s what we’re trying to stop,” Senator Bill Cassidy, head of the Senate committee that crafted the proposal, told The Hill.
Find out more below about what future borrowers can expect.
What are the student loan caps?
Graduate Loans
Direct Plus Loans (commonly referred to as grad PLUS loans) have been used by graduate and professional students to help fund their education. However, the new law eliminates this type of loan moving forward, leaving grad students with a different option.
Instead, those in need of financial assistance will have to take out Direct Unsubsidized Loans, reports CBS News. (Unsubsidized means the student is expected to pay all interest on the loan, including while in school and during any deferment). The caps on these student loans will be based on the educational track.
Professional degrees (such as law and medicine) will have a limit of $50,000 per school year and $200,000 for a lifetime. Those getting an advanced degree in a nonprofessional track (like history or English) will have a yearly cap of $20,000 and a lifetime cap of $100,000.
Those numbers will change, though, depending on how many credit hours a student is taking. Part-time students, for example, would not be able to borrow the maximum loan limit.
Though there were initially talks of loan caps for undergraduate programs, it seems that the proposal did not make it into the final legislation.
Parent Plus Loans
Parent PLUS Loans, another type of Direct Plus Loan, allow parents to help pay for college expenses not covered by other financial aid. The criteria for eligibility:
- Being the biological or adoptive parent of a dependent undergraduate student enrolled at least half-time at an eligible school
- Having a good credit history
- Meeting the general eligibility requirements for federal student aid
With the new student loan caps, parents will now only be able to borrow $20,000 a year. There’s also a lifetime total of $65,000.
Previously, there was not a loan amount limit for PLUS loans. “The maximum PLUS loan amount you can borrow is the cost of attendance at the school your child will attend minus any other financial assistance your child receives,” the Federal Student Aid website currently states. “The cost of attendance is determined by the school. “
Another change to financial aid
Pell Grants
Unlike a loan, the federal Pell Grant is not designed to be paid back. The financial benefit helps students with low or moderate income pay for college or career school.
Under the new law, it could become harder for many students to be considered. If someone’s Student Aid Index is at least double the amount of the maximum Pell Grant (currently $7,395 for the 2025-2026 year), they will not be able to receive any Pell funds. The Student Aid Index is the number that reflects your current financial need based on the information provided in the Free Application for Federal Student Aid. A lower number means a student usually has a higher chance of qualifying for need-based financial aid.
For students in workforce training programs, however, Pell Grant eligibility has expanded. Students who are enrolling in these programs at community colleges could receive the funds as long as they are taking between 150 and 600 hours of instruction (or equivalent credit hours) for anywhere from eight and 15 weeks. But they cannot be working towards an advanced degree or have been a recipient of the grant already.
When do the new student loan caps start?
For those already enrolled in a college or university, these changes likely won’t impact them. CNBC reports that current borrowers will be able to continue borrowing without being subjected to the new student loan caps. Grad PLUS loans will also continue to be available through the end of those students’ education.
All of the other changes will go into effect on July 1, 2026. More details on what post-secondary students and their parents can do to prepare will likely be revealed as the roll-out date for the new policies gets closer.
