The Trump administration overhauled federal student loans on July 1, 2026, imposing strict annual caps on graduate borrowing and ending the option to finance full advanced degree costs.
Standard graduate loans are now capped at $20,500 per year with a $100,000 lifetime limit.
Professional programs such as law and medicine face a $50,000 annual cap and a $200,000 maximum.
The policy aims to push colleges to reduce tuition inflation, but education experts warn it may limit access for lower-income students and worsen workforce shortages.
Simultaneously, the administration canceled the Saving on a Valuable Education (SAVE) repayment plan, affecting over 6.9 million borrowers.
They must choose alternative repayment options by September 29, 2026, or automatically enter more expensive standard plans.
Legal Challenges and Concerns
Washington Attorney General Nick Brown, along with a coalition of 23 states and two governors, filed a lawsuit targeting the graduate loan limitations.
"Our state needs nurses and other healthcare workers, but this unlawful rule will make it much more difficult for Washingtonians to pursue professional degrees," Brown said.
The Education Department also finalized an accountability rule requiring program graduates to out-earn high school graduates to maintain federal loan eligibility, drawing criticism from faith-based institutions.
Jennifer Delaney, an education finance expert at UC Berkeley, said the policy will disproportionately affect lower-income students.
"There will be an inequitable lockout of folks from lower-income backgrounds," she noted.
Wil Del Pilar, senior vice president at EdTrust, emphasized that graduate degrees typically lead to higher income.
"If lower-income households can't afford to attend, you are creating limits on who people can be," he said.
Prospective students are reconsidering their plans.
Diego Bollo, an incoming UCLA graduate student, said he would not pursue his program under the new rules.
"Education for me has always been a pillar for socioeconomic mobility," Bollo added.
Religious institutions secured a partial concession protecting Pell Grant eligibility for programs that do not use federal loans.
Rabbi A. D.
Motzen of Agudath Israel of America called the exemption "a very reasonable request" that was ultimately successful.
However, Philip Dearborn, president of the Association for Biblical Higher Education Commission on Accreditation, argued that the earnings metric conflicts with the mission of divinity programs.
"Students aren't in it to make money," he said. "They're answering God's call on their lives."
Dearborn confirmed advocacy groups will continue challenging the framework.
