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How Will New Loan Limits Affect Borrowing by Field of Study and Degree Level?By Mark Kantrowitz Upcoming changes in federal student loan limits will shift some borrowing to private student loans. But, some students will not be able to qualify for traditional private student loans. The risk is these students will opt out of further education entirely unless they secure second-look private student loans, borrow money from friends and family, pay for college with credit cards or home equity loans, or shift their enrollment to lower-cost colleges, such as in-state public colleges.
New Federal Student Loan Limits
The One Big Beautiful Bill Act (OBBBA) (P.L. 119-21) made significant changes to the annual and aggregate federal education loan limits, effective July 1, 2026. The Federal Direct Grad PLUS loan has been repealed. This loan previously allowed graduate and professional school students to borrow up to the full cost of attendance minus other aid, with no aggregate cap. Instead, the annual and aggregate loan limits for the graduate Federal Direct Stafford Loan have been increased, as follows:
Only 11 degree programs have been designated as professional degree programs, making them eligible for the higher professional loan limits:
Although the Federal Direct Parent PLUS loan has not been repealed, it is now subject to new fixed annual and aggregate limits. Parents can borrow up to $20,000 per year and $65,000 in aggregate per dependent student. Both parents can borrow for a single student, but the combined borrowing cannot exceed these limits. The annual and aggregate loan limits for undergraduate Federal Direct Stafford Loans have not changed and remain frozen at 2008 levels. However, the annual loan limits will be prorated based on the student's enrollment status.
Before this change, students who were enrolled on a half-time basis were eligible for the same loan limits as students who were enrolled on a full-time basis.
Estimating the Impact on Federal Loan BorrowingThe 2019-2020 National Postsecondary Student Aid Study (NPSAS) can be used to estimate how many students will need to borrow beyond the new federal loan limits. The NPSAS is a quadrennial study of how students pay for college and graduate/professional school. The 2019-2020 NPSAS is the most recent available. This table shows the percentage of students borrowing in 2019-2020 beyond the new annual and aggregate loan limits.
Note: Data for Chiropractic, Podiatry and Theology is unavailable, as it does not satisfy minimum reporting quality standards. Aggregate data for Optometry and Psychology is also unavailable. For most of these degrees and fields, the annual limits will have a bigger impact on borrowing than the aggregate limits. Overall, about 9% of graduate students, 30% of professional students and 1% of parents will need to borrow beyond the new federal loan limits. However, it is likely that borrowing has increased in the seven years since 2019-2020 NPSAS. Aggregate debt is probably $10,000 higher on average, so the percentage who will need to borrow beyond the annual and aggregate loan limits may have increased. Limits on Eligibility for Private Student LoansA study by the Federal Reserve Bank of Philadelphia and American University's Postsecondary Education and Economics Research (PEER) Center evaluates the impact of the repeal of the Grad PLUS loan and the new annual and aggregate loan limits for graduate and professional school students on graduate students who have low or no credit scores. These borrowers may be unable to obtain a private student loan to supplement the federal student loans starting on July 1, 2026. PEER data shows about 28% of graduate and professional school students borrow more than the new loan limits. Of these borrowers, 38% have subprime credit scores or no credit scores. An additional third (32%) have credit scores of 670-739. For comparison, only 13% were previously ineligible for the Federal Direct Grad PLUS Loan under the more lenient adverse credit history criteria. For-profit graduate schools are more likely to be affected than public and private non-profit graduate schools. At for-profit graduate schools, 60% have credit scores below 670, compared with 36% at private non-profit colleges and 38% at public colleges. The new annual loan limits will potentially affect more than a third of graduate borrowers based on previous borrowing patterns. 27% of students in master's degree programs who borrowed federal loans to pay for their education will be above the annual limit, 46% of students in doctoral degree programs, and 36% of students in professional degree programs. Students in master's degree programs are more likely to have credit scores below 670 or no credit score than students in more advanced graduate and professional degree programs. About a quarter (26%) of students in professional degree programs for the health professions have low or no credit scores. The inability of graduate students to obtain private student loans will disproportionately affect low-income students. This may shift their enrollment to lower-cost colleges, such as in-state public colleges. Some may opt out of graduate school altogether. The Consumer Bankers Association (CBA) published a report with similar findings. This report analyzes the impact of changes to graduate student lending under the new loan limits. CBA estimates that 2.5% of new graduate students will be affected by the changes to federal student loans, about a quarter of the borrowers who previously relied on the Grad PLUS loan program. CBA also estimates that private student loans will address the needs of at least three-quarters of these students.
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