Numerous changes to student loan policy went into effect July 1 as a part of the Trump administration’s One Big Beautiful Bill Act.
The bill amends federal funding for graduate students, professional students and parents, placing caps and unprecedented restrictions on student loans.
Federal Direct PLUS Loans previously offered graduate students and parents additional financial aid if students needed more than scholarships, grants and federal student loans to cover college expenses.
These included Parent PLUS Loans for parents with financially dependent students and Graduate PLUS Loans. Each has a maximum loan amount of the cost of attendance minus any other financial aid received by the student.
While changes to student loan policy have historically expanded programs, the One Big Beautiful Bill has done the opposite, according to Betsy Mayotte, the president and founder of The Institute of Student Loan Advisors.
The Parent PLUS program was scaled back, while the Graduate PLUS program has been fully eliminated. As of July 1, students in graduate programs are only able to borrow $20,500 per year, with a lifetime cap of $100,000, while students in professional programs can borrow $50,000 per year and are capped overall at $200,000.
Parent PLUS borrowers are also facing significant reductions, she said.
“The amount that undergraduate dependent students can borrow under their own name isn’t changing,” Mayotte said, “but the amount their parents can borrow has been drastically reduced.”
Parent PLUS borrowers are now limited to $20,000 a year and no more than $65,000 per student.
By making less money available, Congress’ goal is to reduce the cost of higher education through a “trickle-down effect,” hoping to encourage colleges to lower costs because of the restrictions. But Mayotte worries this won’t be the case.
The bill aims to decrease overborrowing, but Mayotte worries about lower income and middle class families having less access to higher education due to financial restrictions.
Until the cost of higher education is directly addressed, loans will continue to be sought after, she said.
Many families calculated the affordability of their loans using income-based repayment plans, she added, and they now face required monthly payments.
“These people borrowed with the understanding that they’d have access to plans based on their income or interest-only plans,” Mayotte said.
Due to a lack of communication about the changes, many borrowers weren’t sure how to avoid losing access to the plans they signed up for, she said. Many will likely default on their loans, she added.
To some experts, the changes are the latest in the gradual shift toward unaffordability for higher education. Over time, college has changed from a publicly subsidized good to an individual financial burden, said Jillian Berman, a journalist at financial news platform MarketWatch and author of “Sunk Cost.”
“Originally when they started the program, the idea was that the government was trying to subsidize people going to college because they thought it was good for the country for more people to go to college,” Berman said.
Now, not only have financial burdens shifted, but states have struggled to fund public institutions, making college more expensive, she said.
Although the intent behind the One Big Beautiful Bill’s student loan caps may have been to reduce the cost of higher education, Berman said, the actual result could be quite different.
“A lot of what we’ve seen is states and schools launching their own loan programs, private lenders being really excited to capture this loan opportunity,” she said. “It’s not necessarily the case that they’re lowering the price.”
Because private loans require a credit check, people from low-income families or disadvantaged backgrounds may struggle to obtain alternative financing.
“I think people are really worried that it’s going to mean fewer people are going to go to graduate school,” Berman said.
Jim Houser, a college advisor and the founder of Educ8Fit Consulting, said he’s also concerned the implementation of graduate loan restrictions could reduce the rate of applications and admissions to graduate programs.
“Now, that’s probably way overdue because some students were borrowing too much money, but the caps are quite low,” Houser said. “It’s just not realistic for students to be able to pay that amount and get a graduate degree.”
Students are left with few options, Houser said, either relying on private loans — which often require a cosigner — or deciding against graduate or professional school altogether.
Admissions officers have already seen these impacts on aspiring medical students, he added.
Houser recalled a conversation with a colleague who said the composition of students being admitted to pre-med programs has evolved. She believes admissions assume students with financial need won’t be able to borrow enough money to afford medical school due to recent restrictions, so they reject them despite their qualifications.
Impacts of the One Big Beautiful Bill on student loans are still being determined. Megan Walter, a senior policy analyst with the National Association of Student Financial Aid Administrators, attributes the uncertainty to the short period of time allocated to moving such a monumental piece of legislation.
“This is the biggest change we’ve seen to higher education in 30-plus years,” Walter said. “To do that in such a short period of time is really just unheard of and created a lot of confusion and just chaos behind the scenes.”
In May 2026, a lawsuit about the differentiation between graduate and professional programs was filed because of the notable groups of students excluded on the professional program list, including nursing students. Without Graduate PLUS Loans, this differentiation will halve the funds available to graduate students in programs not listed as professional.
Students already enrolled in a graduate or professional program are eligible for the same loans they’ve had since the beginning of their program. But for new students, these restrictions could mean letting go of their desired career path.
“I do think there will be people who abandon their educational dreams because the affordability is just not there for them,” Walter said.
Part-time students are also facing a new array of reductions. Student loans will be reduced proportionally to the credit load for undergraduate students who drop below the full-time credit requirements or decide to enroll half-time.
For example, a student enrolled in six credits for a semester will only receive half of the direct loans they were previously eligible for with the same course load, Walter said.
The people who will be most affected by the new part-time proration rules are nontraditional students, such as those who have to work or care for a child while taking classes, Walter said. Money that may have been used for tuition instead has to be used to pay for rent, childcare or other living expenses.
Non-traditional academic paths are becoming more common, Walter added — something the legislature failed to consider.
“This will have a big impact on more people than I think Congress really thought about,” she said.
Walter cautioned students to speak to a financial aid officer before making any schedule changes.
Contact Kendall O’Connor at koconnor@alligator.org.
