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Federal Loan Changes

Key Changes to Federal Student Loans as a result of the One Big Beautiful Bill Act signed into law on July 4, 2025

Enacted on July 4, 2025, the One Big Beautiful Bill Act (OBBB) made significant changes in federal student loan programs. While there are no changes to federal student loans for the 2025–26 academic year, changes resulting from the legislation are slated for July 1, 2026.

What We Know as of October 2025

Federal Direct Graduate PLUS Loans

  • Federal Direct Graduate PLUS loans will be phased out beginning on July 1, 2026; beginning on that date, new Federal Direct Graduate PLUS loans will not be available for graduate students who are new federal loan borrowers on or after July 1, 2026.
  • There will be some continuing eligibility for existing Federal Direct Graduate PLUS borrowers (i.e. referred to as Legacy Borrowers) as they complete their current graduate or professional degree programs.

New Federal Direct Loan Limits

  • Professional programs (e.g. law):
    • Annual limit: $50,000 per academic year
    • Aggregate maximum: $200,000 for loans borrowed as a graduate or professional student.
  • Graduate programs:
    • Annual limit: $20,500 per academic year
    • Aggregate maximum: $100,000 for loans borrowed as a graduate student.
  • New Lifetime Limit on all Federal Loans
    • $257,500 borrowing cap on all federal loans (undergraduate and graduate/professional).

What Remains Unclear as of October 2025

Clarification of what is considered a “Professional” vs. “Graduate” program?

  • The current definition of a professional degree program is a degree program that signifies both completion of the academic requirements for beginning practice in a given profession and a level of professional skill beyond that normally required for a bachelor’s degree. Professional licensure is also generally required.
  • The programs explicitly listed in regulation include: Pharmacy, Dentistry, Veterinary Medicine, Chiropractic Medicine, Law (JD), Medicine, Optometry, Osteopathic Medicine, Podiatry, Optometry, and Theology (M.Div).
  • The current guidance from the Department of Education (ED) remains vague and not exhaustive.
  • In the months ahead, ED will need to confirm which programs a school can determine to be Professional vs. Graduate Degree Programs.

Grad PLUS Loans for Existing Borrowers

  • It’s uncertain, but the current indication is that a student who borrows any Federal Direct Loan before July 1, 2026, will remain eligible to borrow a Federal Direct Graduate PLUS loan for three academic years or until program completion so long as that student remains in the same program at the same school for which they borrowed the pre-July 1, 2026 loan.
  • Awaiting further guidance from ED.

Loan Proration for Part-Time Students

  • The bill includes a provision to prorate loan amounts based on enrollment.
  • Part-time graduate students (e.g., those enrolled less than full-time) would only be eligible for a portion of the annual loan limit.
  • Awaiting further guidance from ED.

New Repayment Plans

  • For new loans disbursed after July 1, 2026, the bill eliminates current income-driven repayment plans (IBR, PAYE, SAVE) and replaces them with a new Repayment Assistance Program (RAP).
  • Students who have borrowed loans before July 1, 2026, and will borrow a new loan after July 1, 2026, are limited to the new RAP or the standard plans for the new loan.
  • RAP borrowers will not be locked into a 30-year plan. They can switch to a standard plan, which ranges from 10 to 25 years.
  • Borrowers with no new loans made on or after July 1, 2026, can continue to be eligible to enroll in the current Standard, current Income Based (IBR), Graduated, and Extended repayment plans, and could also opt in to the new RAP. Current borrowers enrolled in ICR, PAYE, or SAVE plans must transition to a new repayment plan by July 1, 2028. If no selection is made by that date, they will be moved into RAP.
  • More information on the new RAP is forthcoming.

Important disclaimer: The information contained on this page is provided by St. Thomas to educate students to the changing landscape of federal student loan programs. While it is based on our good faith understanding of the evolving federal standards, it is not official guidance and should not be regarded by students as definitive. St. Thomas will continue to track all these changes and update this site as more clarification/guidance is released by ED.