The “One Big Beautiful Bill” from the Donald Trump administration has begun reshaping how Americans borrow and repay college student loans. The bill features the most significant overhaul of the federal student lending system in decades and is set to take effect on July 1, 2026. This bill will end up affecting millions of borrowers, colleges, and graduate programs across the United States due to the language.
Donald Trump’s Plan Reshapes Federal Borrowing
One of the most significant changes championed by President Donald Trump is the elimination of Graduate PLUS loans for new borrowers beginning with the 2026-2027 academic year. These loans previously allowed graduate students to borrow up to the full cost of attendance after exhausting other federal aid options. However, under the new framework, graduate students face stricter federal borrowing limits.
For one, student loans for graduate borrowers will generally be capped at $100,000 in lifetime federal loans, reducing the limit based on the earning potential of a particular degree. Meanwhile, professional degree programs such as medicine and law will have a higher lifetime limit of $200,000. But just like with graduate borrowers, a broader lifetime limit applies, and that is a borrowing cap of $257,000.
Experts warn that some families may find it more difficult to finance expensive degrees under the new system. Thought leaders have also warned that stricter loan availability could pressure universities to cut programs that lead to lower earnings, potentially affecting humanities, education, and social science majors, due to their ‘perceived lesser importance’ to society.
However, the administration says the reforms are designed to prevent excessive debt accumulation and encourage institutions to control tuition costs. This comes as education officials have previously argued that unlimited borrowing options contributed to rising tuition and left many graduates struggling with repayment. Thus, the cap was a way to actually combat rising tuition and reduce the amount of student loans that individuals are burdened with after their schooling is done.
However, critics of the “One Big Beautiful Bill” say the changes could disproportionately affect students in fields that require advanced degrees but do not offer salaries high enough to justify private financing. Some examples of these include nursing organizations and higher education groups, which have raised concerns that the new limits could worsen workforce shortages by making graduate education less affordable.
In order to fill the gap for students, some universities are reportedly already exploring alternative funding solutions. Some of these include expanded scholarships and partnerships with private lenders to offset the loss of Graduate PLUS financing.
Student Loans Face New Repayment Rules and Loan Caps
The overhaul extends beyond borrowing limits and actually moves into the territory of how these student loans are expected to be paid back. Any federal student loans issued after July 1, 2026, will move under a simplified repayment system. Interestingly, this news simplified repayment system significantly reduces the number of repayment options available to borrowers, but is supposed to be fairer.
For example, student loan repayments will fall under a standard repayment plan and a new Repayment Assistance Plan (RAP), which bases monthly payments on income and offers forgiveness after 30 years. The current payment options, such as PAYE and ICR, are scheduled to be phased out over time and eventually eliminated completely.
The One Big Beautiful Bill does not just apply to new student loans alone, but also has something in store for those who currently have student loans. The Biden-era SAVE plan was widely popular, capturing millions of students, who will now be required to transition to different repayment options as the program is phased out. It is advisable to choose a payment plan because those who fail to select a new repayment plan could be automatically placed into repayment structures that result in higher monthly payments.
For more information, the student loan reforms are largely contained in Subtitle B, Section 81001 ('Establishment of Loan Limits') of the One Big Beautiful Bill Act, which eliminates Graduate PLUS loans, caps graduate borrowing, and imposes new limits on Parent PLUS loans