The U.S. Department of Education finalized a rework of the federal student loan system on Thursday (April 30), in compliance with President Donald Trump’s Working Families Tax Cuts Act, signed into law on July 4, 2025.

“The Department’s final rule will carry out the Act's sweeping higher education reforms to support student borrowers and improve the health of the federal student lending system,” the press release reads.

These changes will significantly limit how much students and parents can borrow through the federal loan program

Most will take effect on July 1, 2026; those related to rehabilitation, deferment, and forbearance will take effect on July 1, 2027, and the sunsetting of certain repayment plans will take effect on July 1, 2028.

The final four provisions are as follows:

Eliminates the Grad PLUS program, thereby ending unlimited borrowing.
Establishes annual loan limits for graduate and professional students.
Permits institutions to establish their own programmatic loan caps that match the true value of their academic programs, preventing student overborrowing.
Establishes a new Tiered Standard plan for student loan repayment and a new income-driven Repayment Assistance Plan, eliminating negative amortization.

Graduate student loans will be capped at $20,500, with a maximum aggregate cap of $100,000, while professional loans will be capped at $50,000, max of $200,000.

Parent PLUS borrowers will also be capped for the first time at $20,000, with an aggregate cap of $65,000 per dependent.

These changes aim to ensure students continue to have access to federal student loans while helping prevent them from taking on unmanageable levels of debt, according to the release.

The department says the changes could save taxpayers $409 billion by eliminating illegal loan-forgiveness schemes and protecting students from overborrowing.

“The Trump Administration is focused on putting students and taxpayers first, which is why we are implementing durable policies to make higher education more affordable,” Under Secretary of Education Nicholas Kent wrote in the release. “This final rule will help ensure students can access higher education without racking up excessive loan debt, offer repayment options that better serve borrowers, and force institutions to reduce costs.”

Data from J.P. Morgan Asset Management reveal that college tuition has risen more than any other household expense since 1983, increasing by 914%.

Student loan debt has also exceeded both national cumulative credit card debt and cumulative auto debt as of 2025, according to the Federal Reserve Bank of New York.

Across racial and gender demographics, the majority of this debt is held by Black women. 43.3% reproted having had student loan debt in 2022, according to the Survey of Household Economics and Decisionmaking (SHED).

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