Major Shake-Up in Federal Student Loan System
In a landmark move reshaping U.S. higher education funding, the Trump administration has announced the elimination of the federal Grad PLUS loan program, a key source of financing for millions of graduate students. The change comes as part of President Trump’s One Big Beautiful Bill Act (OBBBA), unveiled by the Department of Education during a rulemaking session held in early November 2025.
The decision marks the biggest transformation in federal student aid in decades, impacting current and future borrowers across the nation. Officials say the new rules will simplify repayment systems, reduce excessive borrowing, and hold universities accountable for tuition increases.
Grad PLUS Program Officially Eliminated
Under the new regulations, the Grad PLUS loan — which previously allowed graduate students to borrow up to the full cost of attendance — will be eliminated starting July 2026. In its place, new borrowing caps will limit how much students can take out each year. Graduate students will now be restricted to $20,500 annually, with a lifetime cap of $100,000, while professional students (such as those in law or medicine) will be capped at $50,000 annually, not to exceed $200,000 total.
The Parent PLUS Loan program will also face new limits to prevent overborrowing and reduce the risk of long-term debt.
According to the Department of Education, these measures are designed to “prevent unsustainable borrowing and put downward pressure on rising tuition costs.” The administration believes that limiting loan amounts will encourage universities to rethink pricing models and promote degrees that lead to higher returns in the job market.
New Repayment Assistance Plan (RAP) Replaces Forgiveness Programs
In addition to ending Grad PLUS, the Trump administration is consolidating multiple repayment and forgiveness programs into a single new option called the Repayment Assistance Plan (RAP). Set to launch in July 2026, RAP will offer income-based repayment terms while maintaining a minimum payment requirement each month — a shift from previous forgiveness programs that offered more leniency.
Under Secretary of Education Nicholas Kent stated, “This will simplify our complex student loan repayment system and align higher education with workforce needs.”
Changes to Public Service Loan Forgiveness (PSLF) Spark Backlash
Another major change involves the Public Service Loan Forgiveness (PSLF) program. Starting July 1, 2026, workers in certain nonprofit or government organizations may lose eligibility if their employers are found to have a “substantial illegal purpose.” This could include groups involved in aiding undocumented immigrants or providing gender-affirming care to minors where prohibited by law.
The Department will grant discretion to the Education Secretary to determine eligibility based on court rulings, settlements, or other evidence — even in cases without formal convictions.
These revisions have already triggered legal challenges. Four U.S. cities — including Boston and Chicago — along with major labor unions, have filed lawsuits claiming the new PSLF rules are unconstitutional and undermine public sector commitments.
Student and Expert Reactions
Financial experts say the reforms could prompt students to reconsider graduate education altogether. Alex Beene, a financial literacy instructor at the University of Tennessee, told Newsweek, “With caps and fewer forgiveness options, students may shift to more stable degree paths that promise better returns.”
He added that the elimination of Grad PLUS loans and the new RAP plan “will require borrowers to track and adapt to a completely different system over the next few years.”
A Turning Point for Higher Education Policy
The elimination of the Grad PLUS loan program represents a major turning point for American higher education. While supporters argue it will rein in skyrocketing tuition and promote financial responsibility, critics fear it could limit access to advanced degrees for low- and middle-income students.
As the U.S. prepares for the new rules to take effect in 2026, universities and borrowers alike are bracing for a more constrained lending landscape — one that may reshape how Americans pursue graduate and professional education.
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