Trump Administration Announces Changes to Student Loan Policies
The U.S. Department of Education has announced significant changes to student loan policies under President Trump’s One Big Beautiful Bill Act (OBBBA). These changes aim to reshape the federal loan landscape for millions of borrowers.
Key Reforms to Student Loan Policies
Following a recent negotiated rulemaking session, the Department has finalized several critical reforms. The most notable changes include the elimination of the Grad PLUS loan program and new limits on Parent PLUS loans.
New Borrowing Caps and Repayment Plans
- Graduate students will borrow a maximum of $20,500 annually, with a lifetime cap of $100,000.
- Professional students will face a cap of $50,000 per year, leading to a $200,000 lifetime limit.
- A new single Repayment Assistance Plan (RAP) is set to launch in July 2026.
The Department claims these changes are necessary to prevent unsustainable borrowing and escalating tuition costs. Additionally, multiple existing repayment options will be dissolved under this new framework.
Revisions to Public Service Loan Forgiveness (PSLF)
New agreements concerning the PSLF program will also take effect on July 1, 2026. The Department will exclude public service employers with a “substantial illegal purpose.” This includes organizations involved in illegal activities or those providing certain types of healthcare that are restricted by law.
- Employees from ineligible organizations will not qualify for PSLF loan relief.
- The Education Secretary will have the discretion to determine eligibility based on various factors, including legal judgments.
- Employers can regain PSLF eligibility after they complete a corrective action plan or wait ten years.
Legal Challenges and Opposition
Several cities, including Boston and Chicago, along with major labor unions, are challenging these new rules in federal court. They argue that the changes undermine previous Congressional commitments and jeopardize staffing in critical public sector roles.
In 2022, around 9 million borrowers were potentially eligible for PSLF, but these reforms may significantly reduce that number.
Reactions from Officials and Experts
Under Secretary of Education Nicholas Kent stated that the reforms will simplify the student loan system and align educational outcomes with workforce needs. The consensus reached during negotiations aims to hold universities accountable and lessen tuition costs.
Financial literacy instructor Alex Beene noted that these sweeping changes will require current and future students to adjust their plans and financial strategies. The creation of the RAP will provide some relief, but it requires a minimum monthly payment.
Future Implications for Borrowers
Students and graduates will need to reassess their loan details with the upcoming reforms. Changes may lead many students to choose more secure career paths, with an emphasis on degrees that offer better financial outcomes. These new policies represent a significant shift in how student loans are managed and may impact future educational decisions for many young Americans.
