If you or someone you love is planning to borrow for college, pay attention—student loans just hit a turning point. Thanks to a sweeping bill passed in the Senate on July 1, 2025, federal student loan rules are being rewritten. The changes touch nearly every borrower, from first-years to grad students to parents.
Student Loans Will Never Be the Same After This Senate Move
| Change | Impact |
|---|---|
| Borrowing caps for grad/parent loans | Limits how much students and parents can take out |
| IDR plans consolidated | Fewer, longer repayment plans with forgiveness only after 30 years |
| Grad PLUS loans eliminated | Ends a major borrowing option for advanced degrees |
This bill marks a massive shift in how the U.S. funds college. It’s not just a policy tweak—it’s a top-to-bottom rewrite. While some changes bring needed clarity and accountability, others could reduce access or increase risk for borrowers. Staying informed, acting early, and choosing wisely will be more important than ever.
Major Borrowing Caps Hit Grad Students and Parents
One of the most eye-catching changes? New annual and lifetime loan limits. Graduate students can borrow only $20,500 per year and up to $100,000 total under Stafford loans. Medical and legal students can go up to $200,000. Parent PLUS loans are capped at $65,000 per child.
These caps replace the previous policy of essentially “unlimited” borrowing for those who qualified. Families relying on loans to bridge the gap at expensive institutions will now need to find new funding sources. As someone who took out PLUS loans for my son’s law degree, I know firsthand how this limit could force hard choices.
No More Grad PLUS Loans
Starting June 30, 2025, Graduate PLUS loans—often used to cover the remaining costs after Stafford maxes out—will be gone. For many pursuing expensive master’s or professional programs, this is a seismic shift. Students may have to turn to private loans, which often come with higher rates and fewer consumer protections.
Repayment Plan Shakeup
From July 1, 2026, all new borrowers will face a streamlined repayment menu:
- A standard 10-year fixed plan
- A new Income-Driven Repayment Assistance Plan (RAP) with forgiveness after 30 years
Gone are the popular PAYE, SAVE, and other income-driven options. Current borrowers can stick with existing plans, but new enrollees won’t have those choices. This simplifies the system but may also raise long-term costs.
Public Service Loan Forgiveness Changes
Under the new bill, medical residents and others in training can still count their work toward Public Service Loan Forgiveness (PSLF)—but only if their program qualifies under tightened definitions. That clarity came only after major pushback from healthcare groups, who warned of critical worker shortages if forgiveness rules were narrowed too far.
Colleges Held Accountable for Bad Outcomes
For the first time, the federal government will tie loan eligibility to program-level earnings. If a school’s graduates earn too little compared to their debt, that program could lose access to all federal aid. The goal? Pressure colleges to cut low-value degrees. But critics worry about access, especially in underserved communities.
Pell Grants Expand—But with Limits
Pell Grants will now cover short-term (8 to 15-week) job training programs. But if a student already has another scholarship, they may be excluded. This expansion could boost access to trades and fast-track certifications—but the fine print may trip some students up.
Wealthy Colleges Face New Taxes
Nonprofit universities with large endowments will now face a new tiered tax on investment earnings. Lawmakers say this levels the playing field. Critics argue it may discourage aid and research spending.
Consumer Protections Put on Pause
Protections like Borrower Defense (used in cases of fraud) and Closed School Discharges will be frozen for a decade. That means fewer ways for students to cancel debt if they get scammed or their school shuts down.
What You Should Do Now
1. Borrow before July 1, 2026: Current rules may be more generous.
2. Know your options: If you’re starting grad school, understand the caps and plan for gaps.
3. Stick with PSLF rules: Qualifying employment is more important than ever.
4. Track your school: Program-level earnings data will matter soon.
5. Double-check Pell eligibility: Especially for short-term training programs.
