Major Overhaul Announced for U.S. Student Loans Under Trump Administration
Big changes are coming to student loans in the United States, and they could affect millions of borrowers. On Thursday, the Department of Education announced the completion of its latest rulemaking session under President Trump’s One Big Beautiful Bill Act, or OBBBA. The update introduces sweeping reforms to federal student loans, some of the most significant in decades, and aims to simplify repayment while reining in excessive borrowing.
Under the new rules, the Grad PLUS loan program has been eliminated, and strict caps have been imposed on Parent PLUS loans. For graduate students, annual borrowing will now be limited to $20,500, with a lifetime maximum of $100,000. Professional students, such as those pursuing law or medical degrees, will be capped at $50,000 per year, with a $200,000 lifetime maximum. These caps are designed to prevent unsustainable debt and encourage students to consider the true cost of their education.
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Repayment plans have also been overhauled. The previous, often confusing options created under the Obama and Biden administrations are being replaced with a single, simplified Repayment Assistance Plan (RAP), set to launch in July 2026. This plan will offer income-based relief to borrowers but still requires a minimum monthly payment, a structure intended to make repayment more predictable.
At the same time, the Public Service Loan Forgiveness (PSLF) program is being revised. Employees of nonprofit or government organizations found to have a “substantial illegal purpose” will be excluded from forgiveness. Examples cited include organizations engaged in prohibited gender-affirming care for minors, supporting undocumented immigrants in violation of law, or involvement in terrorism-related activities. While payments already made before July 1, 2026, will be protected, these changes are expected to reduce the number of borrowers eligible for PSLF, potentially affecting millions who had counted on this form of debt relief.
The move has already sparked legal pushback. Several U.S. cities, including Boston and Chicago, along with major labor unions, have filed lawsuits arguing that the new PSLF rules are unlawful and undermine prior Congressional commitments. They warn that restricting forgiveness could make it harder to attract and retain workers in vital public service roles.
Education officials have framed the changes as necessary to modernize the student loan system and make higher education more accountable. Under Secretary of Education Nicholas Kent said the reforms will put downward pressure on tuition costs and align education more closely with workforce needs, benefiting borrowers by reducing the risk of overwhelming debt. Financial experts warn, however, that students will need to carefully adjust their borrowing and career plans to navigate these new rules effectively.
In short, the Trump administration’s reforms represent a major reshaping of federal student loan policy, affecting both current and future borrowers. With fewer forgiveness options, stricter loan limits, and a new streamlined repayment plan, students and families are being asked to rethink how they finance higher education and manage their debt in the years ahead.
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