The Trump administration on Thursday unveiled a regulatory overhaul of the federal student-loan system, streamlining the repayment system and pressuring universities to lower costs by setting borrowing limits on graduate degrees based on earnings potential.
The final rule set for publication Friday in the Federal Register seeks to drive down the costs of graduate school by placing a $257,000 lifetime maximum on federal student loans made after July 1, acting to implement the provisions of the 2025 One Big Beautiful Bill Act.
“Colleges and universities raked in billions of dollars at the expense of students and taxpayers over the past 20 years, and today that era is over,” said Undersecretary of Education Nicholas Kent on a Thursday press call.
Students seeking a pharmacy graduate degree will also be able to borrow more than those pursuing a master’s in women’s or gender studies.
The rule divides graduate lending into two categories: professional, which includes nine medical degrees as well as law and theology, and graduate, which encompasses all other programs.
Student loans for professional programs are capped at $50,000 annually, with an aggregate cap of $200,000, while graduate degrees are limited to $20,500 annually and an aggregate cap of $100,000.
In addition, Parent PLUS loans will be capped annually at $20,000, with a lifetime cap of $65,000 per dependent.
The student-loan crisis is particularly acute at the graduate level. Students in postbaccalaureate programs hold more than a third of all student loan debt, and yet 40% of graduate degrees have a “negative return on investment,” the department said.
Over the next two years, the department will phase out the Federal Direct Graduate PLUS program, which offers loans covering up to the entire cost of the degree.
“There are really no limits on the Grad Plus program. Institutions can charge whatever they want, and borrowers can take out that amount up to the cost of attendance,” said Mr. Kent.
He said it’s been suggested that “if there were a million-dollar law program, a student could take out a million dollars.”
“This is why we see programs that provide little return on value that are charging $100,000, $200,000 for a journalism or a sociology degree,” Mr. Kent said. “The new loan limits will set manageable loan caps for both graduate and professional students moving forward.”
The 11 degrees under the higher cap are pharmacy, dentistry, veterinary medicine, chiropractic, law, medicine, optometry, osteopathic medicine, podiatry, theology and clinical psychology.
“Nearly all of these fields have long been classified as professional degrees under the Department’s existing regulations, and no program has lost its professional degree classification under the final rule,” said the department in its Fact Sheet on the final rule.
The final rule also allows universities and colleges to implement their own program caps that reflect “the true value of their academic programs, preventing their students from overborrowing in programs with lower earnings or higher default rates,” the department said.
Those taking issue with the loan caps include the American Association of Universities, which raised concerns earlier about possible shortages in fields that fall outside the 11 professional degrees, such as architecture, education and social work.
“The $200,000 loan cap for professional degree programs, plus the small number of programs that would be eligible for it, is likely to reduce access to advanced degrees for many Americans and to create or worsen labor shortages in certain professions,” said the AAU in a Nov. 14 article.
The changes are largely the same as those contained in the Notice of Proposed Rulemaking published Jan. 30 following meetings and negotiations by the Reimagining and Improving Student Education Committee.
Under the 2010 Health Care and Reconciliation Act, the federal government took over administering student loans instead of guaranteeing private student borrowing through banks and other lenders.
Since 2005, college loans have increased by 343%. Outstanding college debt now stands at $1.7 billion, with less than 40% actively repaying their loans and 25% in default, the department said.
“College tuition has increased faster than any other household expense, and 71% of college graduates with debt report delaying major life milestones, like buying a family home,” said Mr. Kent.
The department also replaced the current repayment regimen with two new programs designed to make it easier for borrowers to manage their student loans.
The first, the Tiered Standard plan, provides monthly fixed payments for periods ranging from 10 to 25 years, depending on the borrower’s outstanding principal balance, giving borrowers with higher balances additional time to make good on their loans.
The second plan, the Repayment Assistance Plan, allows payment to be adjusted based on income and family size, meaning that borrowers will “pay more during years when their income is higher and less during years that their income is lower,” the department said.
Those with student loans will be required to sign onto one of the two plans by July 1, with the current income-based plans sunsetting on July 1, 2028.
