OBBBA student loan caps take effect, ending Grad PLUS for new borrowers

Part 1 of 5

Congress passed the One Big Beautiful Bill Act (OBBBA) on July 3, 2025, with the House voting 218 to 214 after the Senate passed it 51 to 50 the day before. Vice President JD Vance cast the tie-breaking vote in the Senate, where Senators Rand Paul of Kentucky, Thom Tillis of North Carolina, and Susan Collins of Maine voted against the bill. President Trump signed H.R. 1 into law on July 4, 2025, as P.L. 119-21.

The bill passed through the budget reconciliation process, which allowed it to clear the Senate with a simple majority instead of the 60 votes normally required to end debate. Senate Parliamentarian rulings during the Byrd bath process forced negotiators to strip several provisions that exceeded the reconciliation rules, reshaping the final education title before passage.

Part 2 of 5

Starting today, the Graduate PLUS Loan Program is eliminated for new borrowers. The program previously let graduate and professional students borrow up to their school's full cost of attendance with no cap. More than 440,000 students borrowed about $14 billion in Grad PLUS loans in the 2023-24 academic year, according to Department of Education Title IV data analyzed by Bloomberg Law.

Existing borrowers who had a federal Direct Loan disbursed before July 1, 2026, for the same program at the same school can continue borrowing under the old rules for up to three years or until they finish their degree, whichever comes first. Students who transfer, change programs, or re-enroll after a withdrawal lose the grandfathered access and fall under the new limits.

Part 3 of 5

Graduate students in non-professional master's and doctoral programs now face an annual cap of $20,500 and a $100,000 aggregate limit on federal unsubsidized loans. Professional degree students in medicine, law, dentistry, pharmacy, optometry, and nine other designated fields can borrow up to $50,000 per year and $200,000 total.

A single $257,500 lifetime ceiling now applies to all federal student loans combined, counting undergraduate and graduate borrowing together. The Brookings Institution found that about 40 percent of graduate students completing a degree accumulate debt above the new cumulative caps, representing roughly 370,000 students in a given year. On an annual basis, 26 percent of graduate students currently borrow above the new annual limits.

Part 4 of 5

Parent PLUS loans are now capped at $20,000 per year per dependent student and $65,000 lifetime per student. Previously, parents could borrow up to the full cost of attendance per child each year with no aggregate limit. Brookings projects the caps constrain roughly 22 to 29 percent of current Parent PLUS borrowers, depending on whether the annual or lifetime limit binds first.

The new limits apply to all parents combined for a single student, so even if two parents are borrowing, the household maximum remains $20,000 per year. Parents of students who already had a Parent PLUS loan disbursed before July 1, 2026, may continue borrowing under the old rules for up to three years or until that student finishes their current program.

Part 5 of 5

Students enrolled less than full-time now receive prorated loan amounts tied directly to their enrollment intensity. A half-time student receives half the applicable annual limit. Before the OBBBA, any student enrolled at least half-time received the full annual loan amount. The proration requirement does not apply to Parent PLUS loans.

The OBBBA also requires students to be enrolled at least half-time to receive any federal loan disbursement at all. Students who drop below half-time enrollment mid-year can keep amounts already disbursed for that payment period, but future disbursements are adjusted based on current enrollment intensity.

Why this matters

Secretary of Education Linda McMahon issued the RISE Final Rule implementing $257,500 lifetime loan caps for all new federal student borrowers, affecting the 440,000 graduate and professional students who used Grad PLUS annually.

Vice President JD Vance cast the 51st vote on July 1, 2025, to pass the OBBBA under budget reconciliation, a process that required only 51 Senate votes instead of 60 and barred any Democratic input on the final text.

Judge Beryl Howell of the U.S. District Court for D.C. issued a preliminary stay on part of the RISE rule's professional degree definition on June 24, 2026, temporarily expanding which programs qualify for the $50,000 annual cap pending the outcome of lawsuits filed by 25 states.

Congress capped Parent PLUS loans at $20,000 per year per child, down from the full cost of attendance, using the Higher Education Act amendment process to cut $2.2 billion in annual undergraduate family borrowing with no corresponding tuition limit on schools.

The Congressional Budget Office projects the loan limits save taxpayers $44 billion over ten years, while the Protect Borrowers coalition found that 40 percent of Americans can't qualify for the private loans the federal government expects to fill the gap.

Sourcesgovtrack.us·H.R. 1fsapartners.ed.gov·GEN-25-04 Dear Colleague LetterCommittee for a Responsible Federal Budget·2025 Reconciliation TrackerJul 11, 2025congress.gov·CRS Report R48727: Amendments to the Higher Education A…news.bloomberglaw.com·GOP Tax Bill Would Eliminate Grad School Loans for Half…savingforcollege.com·Grad PLUS Loans Ending in 2026Committee for a Responsible Federal Budget·What Is In the One Big Beautiful Bill ActJul 15, 2025American Enterprise Institute·An Analysis of the One Big Beautiful Bill Act's Effect…Aug 1, 2025