New Student Loan Limits May Force More Borrowers to Take Out Private Loans

Core Insights - The "One Big, Beautiful Bill" will reduce the federal student loan limits starting in the 2026-27 academic year, potentially pushing students, particularly those in medical programs, towards private loans to cover educational costs [2][7][9] Federal Loan Cap Changes - The aggregate loan limit for non-professional graduate students will decrease from $138,500 to $100,000, while the average non-professional master's degree borrower holds $80,550 in student debt [5][8] - Professional graduate students, such as those in medical and law fields, will see an increased cap of $200,000, but this still falls short of the average medical school debt of $232,100 [8][9] Impact on Borrowers - The elimination of Grad PLUS loans after July 1, 2026, is expected to lead more medical students to rely on private loans, which typically have higher interest rates and lack federal forgiveness options [9][10] - Private loans can cost significantly more in interest, with rates for Grad PLUS loans set at 8.94% compared to private loans that can reach up to 17.88% [10] Parent PLUS Loan Restrictions - The bill introduces an annual limit of $20,000 on Parent PLUS loans, which previously had no cap beyond the cost of attendance, and an aggregate cap of $65,000 [11][12] - In 2020, 17.1% of Parent PLUS borrowers exceeded the $65,000 limit, indicating that some families may still need to seek private loans [12] Additional Loan Restrictions - Higher education institutions may restrict federal loan amounts based on the perceived risk of default in certain degree programs, although this is not expected to affect a large number of students [13]