WASHINGTON — The federal student loan system is set to see a dramatic overhaul beginning this summer, and critics warn it likely will make loans more expensive and difficult to obtain for borrowers — driving them to private lenders or altering their plans for higher education.

Among the major changes are new loan limits for graduate and professional students, a restructured repayment system where new borrowers will have only two plans to choose from and the elimination of a key loan program for graduate and professional students that allowed for unlimited borrowing.

The provisions — most of which will take effect July 1 — stem from congressional Republicans’ mega tax and spending cut bill that President Donald Trump signed into law last year. 

The U.S. Department of Education finalized regulations, published May 1, that implement sweeping changes outlined in the GOP’s “big, beautiful” law. The department received more than 80,000 public comments before the rule was finalized. 

Under Secretary of Education Nicholas Kent said that “at a high level,” the reforms center on “lowering the cost of college, simplifying student loan repayment and restoring accountability to the federal student lending system,” during an April 30 call with reporters regarding the new regulations. 

The average federal student loan debt balance stands at $39,547, according to the Education Data Initiative.

As July 1 approaches, here’s a closer look at some of the biggest changes coming to the federal student loan system: 

Elimination of Grad PLUS 

The Grad PLUS program, which allowed for graduate and professional students to borrow up to the full cost of attendance, will soon be eliminated under the package and unavailable for new borrowers.

“If you are currently borrowing Grad PLUS loans, so you borrowed Grad PLUS loans before July 1, you will be allowed to continue using Grad PLUS until you finish your program, or until three years have expired, basically whichever is sooner,” said Preston Cooper, senior fellow in higher education policy at the American Enterprise Institute, a right-leaning think tank.

“Current students are grandfathered in — it will only be new graduate students, as of this fall, after July 1, who will be subject to the new loan limits,” Cooper said. 

New borrowing caps 

The package also sets forth new annual and aggregate loan limits for graduate and professional students, along with parents who take out federal student loans for dependent undergraduate students. 

Graduate student loans will be capped at $20,500 annually, with a $100,000 aggregate limit. 

Parent PLUS borrowers will have an annual cap of $20,000 and an aggregate cap of $65,000 per dependent. 

Professional student loans will have a $50,000 annual limit and an aggregate cap of $200,000. 

The programs that fall within the department’s “professional” category and are subject to that larger loan cap include: pharmacy, dentistry, veterinary medicine, chiropractic, law, medicine, optometry, osteopathic medicine, podiatry, theology and clinical psychology. 

The department clarified in a fact sheet on the finalized regulations that the “professional” student classifications “do not express a value judgment about the importance of any occupation or field” but instead serve a “loan-administration function.” 

The agency has received immense pushback from groups representing people in fields that do not fall under the department’s definition and will thus be subject to lower annual and lifetime borrowing caps. 

Incoming repayment options 

In another major shift, the regulations replace prior repayment options with two new plans — the Repayment Assistance Plan, or RAP, and the Tiered Standard plan — both of which will launch July 1.

RAP is an income-based repayment plan that “waives unpaid interest for borrowers who make on-time payments that do not fully cover accruing interest,” per the department’s fact sheet. 

Balances under the plan will also “decline with each on-time payment, as unpaid interest is fully waived and the Department then reduces principal by an amount equal to the borrower’s payment, up to $50,” per the agency. 

The Tiered Standard plan offers fixed monthly payments, ranging from a 10-year to 25-year period, depending on the outstanding principal balance of the borrower. 

‘A lot more expensive’

“The upshot is that loan repayment is going to get a lot more expensive for almost everyone, and for some people, it’s going to get significantly more expensive, and the transition is also going to be difficult for a lot of people to manage,” Michele Zampini, associate vice president for federal policy and advocacy at the Institute for College Access & Success, told States Newsroom.

Zampini, whose organization aims to advance affordability, accountability and equity in higher education, said she thinks “there will be a lot of students who will have to turn to the private loan market, who otherwise would have been able to cover their costs through the (Grad PLUS) program.”

Victoria Jackson, assistant director of higher education policy at the nonprofit policy and advocacy group EdTrust, said that with the new loan limits and “drastic cuts to aid availability” in the regulations, “you would really hope that it would come with other, more affordable and better forms of financial aid.” 

“And what they’ve done is just created this vacuum that right now can really only be filled with private loans, which are costlier and riskier for students, or students are just not going to go,” Jackson said.

Meanwhile, the Trump administration continues its efforts to eliminate the Department of Education, including through a series of interagency agreements that transfer several of its responsibilities to other departments. 

Under the most recent agreement, the Treasury Department will take over Education’s responsibility for collecting on defaulted federal student loan debt — the first step in a multiphase process toward Treasury taking on Education’s entire, roughly $1.7 trillion federal student loan portfolio.

Transition to new system

Zampini noted that, when it comes to the incoming student loan regulations, she does not have confidence in the Education Department’s “ability at this moment to successfully manage the transition without a lot of issues, as far as servicing and as far as account tracking and plan enrollment and things like that.” 

Jackson, of EdTrust, said that “by weakening the federal financial aid system, I think there’s a weakening of our higher education system and making it more difficult for low-income students, students of color and other marginalized students to access graduate education.”

She added that “people who complete those degrees tend to have more financial security in the future — they earn more over their lifetimes and, on markers of financial success and opportunity, do better.” 

“I think this is one prong of a plan of undermining our overall higher education system.” 

WASHINGTON — U.S. senators across the aisle pushed back Tuesday against President Donald Trump’s proposal to eliminate funding for programs serving disadvantaged students.

Education Secretary Linda McMahon defended those and other proposed cuts to her agency outlined in Trump’s fiscal 2027 budget request, which calls for $75.7 billion in new discretionary budget authority for the department that would mark a $3.2 billion, or 4.1%, reduction from fiscal 2026 levels. 

The administration has taken major steps to dismantle the 46-year-old Department of Education as part of the president’s quest to send education “back to the states.” That effort continues despite much of the funding and oversight of schools already occurring at the state and local levels.

“We’ve been clear: Shifting authority back to the states will not come at the expense of the central federal programs (and) support, much of which predate the department itself,” McMahon told lawmakers at the hearing of the U.S. Senate Appropriations Subcommittee on Labor, Health and Human Services, Education, and Related Agencies.

The panel shares jurisdiction over Education Department spending with the corresponding subcommittee of the House Appropriations Committee. The president’s budget request is generally considered a starting point for negotiations, but Congress is responsible for deciding federal spending.

Bipartisan support for TRIO 

Republican and Democratic senators took particular aim at the administration’s proposal to eliminate Federal TRIO Programs in fiscal 2027.

The Federal TRIO Programs — funded at $1.19 billion this fiscal year — help support groups including low-income students, first-generation college students, individuals with disabilities and veterans. 

Sen. Susan Collins, chair of the full Senate Appropriations Committee, said she opposes the president’s proposal to eliminate TRIO, noting that these programs have “changed the lives of countless first-generation and low-income students in Maine and across the country.” 

The Maine Republican added that TRIO “enjoys robust support and has made such a difference in the lives of children.” 

Arkansas GOP Sen. John Boozman also emphasized his support for TRIO, noting that in his state, these programs “have been a game-changer in helping low-income and first-generation students not only access higher education, but also succeed once they are there.” 

Sen. Jeff Merkley was the first in his family to go to college and said he comes from a “very blue-collar, frontier, homesteading, timber background.”

The Oregon Democrat said it’s from that perspective he believes that “having conscious programs to help people overcome the cultural chasm that exists between blue-collar kids like myself and that college world that you have very little contact on is enormously valuable in America, and the stats from these programs are pretty damn impressive.” 

The secretary told the panel that while “there are many instances where the TRIO program has been very beneficial … as we look across the country in how to spend these dollars and how to have similar results by maybe not necessarily focusing students towards college degrees, maybe there’s another way for them to have their path to success.” 

McMahon said her agency was in the process of spending “about $2.1 million” for investigating and evaluating the TRIO programs.

In its summary of Trump’s fiscal 2027 budget request, the department said that TRIO “has failed to meet the vast majority of its performance measures, and studies of program effectiveness have shown that it has not increased college enrollment.” 

Dems decry plan to eliminate agency

Meanwhile, McMahon took heat from the leading Democrats on the subcommittee and the broader Senate Appropriations panel over the administration’s ongoing efforts to dismantle the agency. 

Part of those efforts include several interagency agreements between Education and the departments of Labor, Health and Human Services, Interior, State and Treasury that transfer many of Education’s responsibilities to those agencies.

Sen. Tammy Baldwin, ranking member of the subcommittee, said Education “is transferring the vast majority of its programs to other federal departments, agencies with little experience or expertise or capacity to administer them.” 

The Wisconsin Democrat said that instead of “reducing bureaucracy” — a major goal of the administration across the federal government and the department in particular — the transfers are creating “another layer of it.”

She added that “where states previously primarily dealt with the Department of Education, they will now have to deal with multiple federal agencies.” 

Sen. Patty Murray of Washington state, the top Democrat on the full Appropriations Committee, pressed McMahon on the status of the administration mulling the transfer of special education services out of the Education Department amid its dismantling efforts. 

The possible move to transfer programs out of the department’s Office of Special Education and Rehabilitative Services has stoked widespread concern from disability advocates.

McMahon said her department was “still evaluating where those programs would best be located, and we have not made that determination yet.” 

“I can assure you that the intent of this administration is not to put these students at risk in any way whatsoever,” McMahon said. 

But Murray was not satisfied with the secretary’s response, saying she is “deeply concerned that your answer sounds like you’re still moving ahead — let’s make it clear that will break the law, and it will make it a lot harder for these students with disabilities to get the education and understanding that their country will stand behind them with that.” 

WASHINGTON — Congressional Democrats, advocates, students and leaders on Wednesday blasted attempts by President Donald Trump’s administration to do away with funding for minority-serving institutions in higher education.  

U.S. Sen. Mazie Hirono led a press conference outside the U.S. Capitol that called on the administration to fully fund and protect the more than 800 minority-serving institutions, or MSIs, which enroll millions of students of color. Many are from low-income households or are the first in their families to attend college.

“Donald Trump is doing all he can basically to dismantle support for education in this country, and what is happening to minority-serving institutions is part of this all-out attack,” the Hawaii Democrat said. 

“Under the false pretense of addressing discrimination, this regime is limiting access to higher education for underserved and underrepresented groups, and there are millions of students who are being served by these programs,” she added. 

Along with advocates, leaders and students, Hirono was joined by fellow Democrats: Sen. Alex Padilla, chair of the Senate Hispanic-Serving Institutions Caucus; Rep. Mark Takano, first vice chair of the Congressional Asian Pacific American Caucus; Rep. Juan Vargas of California, of the Congressional Hispanic Caucus; and Rep. Danny Davis of Illinois, of the Congressional Black Caucus. 

Padilla, of California, said MSIs are “better training the future leaders, entrepreneurs (and) servants” that communities need. 

“That’s what we’re standing up for. That’s what we’re fighting for, and that’s (why) we’re calling on Republican colleagues to join us, to push back on the threats of this administration and maintain our decades-long steadfast support of minority-serving institutions for the interest of these young people, their families, their communities and our country.” 

Takano, also of California, said “Congress funded these programs, and we will fight for them, and they cannot impound the funds.” 

He added that “Congress has the power of the purse, and we will make sure we hold this administration accountable.” 

Programs called ‘racially discriminatory’

Trump — who has sought to end diversity, equity and inclusion policies in schools — has proposed eliminating funding for minority-serving institutions, totaling $354 million, as part of his fiscal 2027 budget request.  

The U.S. Department of Education in September gutted and reprogrammed $350 million in discretionary funds that support MSIs, over claims that the programs for Black, Asian, Indigenous and Hispanic students and more are “racially discriminatory.”

The agency soon after moved to redirect $495 million in additional funding to historically Black colleges and universities, along with tribal colleges.

The Justice Department in December issued an opinion finding several grant programs for minority-serving institutions to be “unconstitutional.”

U.S. Secretary of Education Linda McMahon concurred with the opinion, and the agency said later that month it was “currently evaluating the full impact” of the opinion on affected programs.

The president signed into law in February a spending package that funds the Education Department at $79 billion this fiscal year and also “increases funding for all Title III and V programs that support HBCUs, Hispanic Serving Institutions, Tribal colleges, and other minority-serving institutions,” per Senate Appropriations Committee Democrats’ summary.