New gov't student-loan restrictions explained: Everything you need to know about the changes

New York Post

16 hours ago

President Trump's Big Beautiful Bill is massively rolling back federal student-loan programs in a nearly complete-180-degree turnaround from the Biden-era debt-forgiveness movement.
The newly passed legislation imposes stark caps on how much some students and their families will be able to borrow from the federal government — and also slashes repayment options and flexibility.
Experts think the changes — some of which begin Aug. 1 — will force the students to look toward private lenders to fill in the gaps. That will likely mean higher interest rates and equally unforgiving repayment plans for things such as hardship deferment.
3 President Trump's newly passed One Big Beautiful Bill is stripping away federal student loan options.
AFP via Getty Images
The White House has characterized the approach as a way to protect taxpayers from a climbing national loan bill while also making colleges and universities lower their prices, which have more than doubled in the past three decades.
But critics fear the new policies will drive too many students to drop out of school or forgo college altogether in favor of more affordable technical career training.
'Congress has never removed benefits from existing borrowers like this,' said Betsy Mayotte, president of the Institute of Student Loan Advisors, to the Wall Street Journal. 'This is really unprecedented.'
Below is everything you need to know about the new rules:
Borrowing limits
Federal loans taken out by parents for their children under the Parent PLUS program will be capped at $20,000 annually, with a total cap of $65,000 per child.
Those changes begin July 1, 2026.
That is a massive change from the previous Parent PLUS program, which allowed parents to take out federal loans covering the complete cost of their child's tuition.
The changes also affect graduate student Grad PLUS loans, which beginning July 2026 will be limited to $20,500 annually for students applying for them and $100,000 total for those seeking general master's degrees, according to CBS News.
For career-path degrees such as medicine or law, annual caps will be $50,000 annually and $200,000 total.
As with the old Parent PLUS parameters, Grad PLUS loans previously covered the full cost of a students' tuition.
3 The White House says the loan changes are intended to encourage colleges and universities to lower tuitions.
AP
Unemployment deferment
Borrows can currently pause student-loan payments if they become unemployed or if they earn under minimum wage.
But the new laws completely eliminate those deferment options for anyone taking out federal loans after July 2027.
Repayment plans
There are currently seven different repayment plans for federal loans. Going forward under the One Big Beautiful Bill, there will be just two.
The new plans will be either a fixed repayment option spanning between 10 and 25 years or the income-driven Repayment Assistance Program, which allows borrowers to put between 1% and 10% of their monthly income toward loan repayment for up to 30 years.
After 30 years, loans can be completely forgiven under the new plan. But the time to land debt forgiveness, three decades, is a substantial increase from the previous federal forgiveness options, which eliminated remaining loans between 20 or 25 years.
All current federal borrowers will be affected by this change and have until July 1, 2028, to pick one of the new plans.
On a more pressing front, the Biden-era SAVE program, which halted interest for nearly 8 million student borrowers, will end Aug. 1, and interest will resume.
3 Some experts think more people will simply stop going to college and attend trade schools instead.
REUTERS
Private lenders and higher-education alternatives
The Big Beautiful Bill has no sway over private lenders but is likely to send students into their hands.
Some of the lenders, such as SoFi, are already gearing up for the move.
'If the government backs away from providing in-school loans, Grad PLUS, etc., we'll absolutely capture that opportunity,' said SoFi CEO Anthony Noto in April. 'We'd be very happy to step in for the government.'
Private loans typically have higher interest rates and are also more difficult to obtain — often requiring co-signers with good credit.
Some experts told the Journal they wouldn't be surprised to see students drop out or stop following the traditional college path altogether and instead seek alternative paths such as trade school or affordable community colleges.
The federal government also appears to be encouraging that through its low-income student Pell Grants. Eligibility for Pell Grants is reduced under the Big Beautiful Bill — with students who receive full scholarships now being barred from receiving the extra grants.
But Pell Grant eligibility has been expanded for people in workforce-training programs under Trump's plan, which allows them 'to be used for short-term, high-quality workforce training programs to support Americans who choose a career or technical education path for career advancement,' the White House said.
Mayotte of the Institute of Student Loan Advisors told the Journal the changes mean 'the days of education for education's sake are gone.
'Knowing that there's not unlimited funds for repayment, families need to be looking at lower-cost alternatives,' she said.