WASHINGTON — Education experts and advocates warned Wednesday that the recent federal student loan system overhaul stemming from the GOP’s mega tax and spending cut law will drive borrowers to private lenders and could derail their higher education plans. 

U.S. Rep. Bobby Scott of Virginia, the top Democrat on the House Committee on Education and Workforce, convened a panel to blast the sweeping loan changes, as well as separate, ongoing efforts from President Donald Trump’s administration to dismantle the Education Department and its impact on the federal student aid system. 

“Student loan debt now exceeds $1.7 trillion. Borrowers need clear guidance and certainty,” Scott said. “Instead, they’re forced to deal with uncertainty and chaos created by an administration that has systematically weakened the federal student aid system.”   

Scott criticized Education’s plans to transfer core student aid functions to the Treasury Department. Under an interagency agreement, or IAA, announced in March, Treasury will take over Education’s responsibility for collecting on defaulted federal student loan debt in what marks the first step in a multi-phase process toward Treasury taking on the entire federal student loan portfolio. 

The Virginia Democrat said Treasury “has no expertise serving students or institutions of higher education or monitoring servicers for accuracy.” 

Meanwhile, the Education Department finalized regulations — most of which took effect July 1 — that implement sweeping student loan system changes outlined in the GOP’s “big, beautiful” law.

Scott said that the sweeping changes to the federal student loan system originating from that law are “compounding the issues that have risen from the dismantling of the Education Department.” 

Borrowing limits

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

Wil Del Pilar, senior vice president at the nonprofit policy and advocacy group EdTrust, said the mega tax and spending cut law “restricts access to federal graduate lending, pushing many borrowers, especially those from low-income and middle-income backgrounds, many of whom are students of color, into the hands of private banks.” 

Del Pilar, who was deputy secretary of postsecondary and higher education for the Pennsylvania Department of Education, said that would present a series of challenges for borrowers. 

“That means higher interest rates, fewer consumer protections, stricter credit requirements, and flat-out denials for some, forcing those students to halt their educational journey,” he said.

Access to graduate education 

Clare McCann, managing director of policy and operations at the Postsecondary Education and Economics Research Center, said her organization was “very concerned that for many borrowers who want to continue to pursue a graduate education, that they will find themselves locked out of the private market or unable to access affordable loans without a qualified cosigner.” 

McCann, whose organization is housed at American University, added that the center’s research suggested almost 40% of student borrowers subject to the new caps have either poor or no credit scores, making them unlikely to be able to borrow money in the private market without a cosigner.

McCann noted that allowing largely unlimited graduate lending is “unwise” and “puts both students and taxpayers at risk,” while calling on Congress to “allow students to borrow enough to make high-return investments in themselves, so long as their loans remain affordable and repayable based on the salaries students should expect.” 

Ellen Keast, a spokesperson for the department, defended the student loan system overhaul, in a statement shared with States Newsroom on Wednesday. 

“Blank checks to universities resulted in tuition skyrocketing for American students and families. Mass student loan forgiveness failed in nearly every courtroom it entered. The student loan portfolio is at a fiscal cliff because the last Administration perpetrated the lie that students do not need to repay their loans,” Keast said. “The Trump Administration is righting these wrongs – all while implementing historic reforms to federal student aid that will drive down the cost of college and simplify student loan repayment.”

WASHINGTON — Students pursuing several advanced degree programs can now access higher loan caps, but the temporary relief has ushered in a wave of uncertainty amid an ongoing legal battle.  

Graduate-level programs such as nursing, occupational therapy and speech-language pathology are, for now, considered “professional” degrees by the U.S. Department of Education after a court order in late June halted the agency’s new “professional” definition while a legal challenge unfolds.

That definition had limited the number of advanced degrees eligible for higher annual and lifetime loan limits to just 11 fields, while excluding several programs, such as nursing.

In response to U.S. District Judge Beryl Howell’s interim ruling, the department temporarily expanded the list of degrees considered “professional” to 29 fields, per guidance given to institutions. 

Pushback from Trump administration

But the Education Department said it was confident its definition is “lawful” and vowed to keep defending the regulations. 

The agency also stressed in its guidance that the temporary “professional” designations “are provided solely to facilitate implementation of the Court’s order and may change as litigation in the case proceeds.”

A department spokesperson, speaking on background, declined to comment on whether the department would appeal the ruling. 

The department said in its guidance that while the case continues, institutions may wish to consider limiting loan amounts to the graduate-level caps for programs temporarily deemed “professional” in an effort to “mitigate potential disruption to student borrowers resulting from changes in program classification that may arise from the ongoing litigation.” 

The programs on the expanded list from the department include: veterinary medicine; law; divinity/ministry; rabbinical studies; clinical psychology; counseling psychology; school psychology; clinical child psychology; health/medical psychology; family psychology; forensic psychology; clinical, counseling and applied psychology; chiropractic; audiology; speech-language pathology; dentistry; anesthesiologist assistant; physician associate/assistant; athletic training; medicine; osteopathic medicine; podiatry; optometry; pharmacy; occupational therapy; physical therapy; registered nursing; nurse anesthetist; and nursing practice. 

On the flip side, the department identified several programs that may have been considered “professional” prior to the court’s ruling but no longer carry the status while the court order is in place, such as theology, pharmaceutical sciences, environmental psychology, and clinical and industrial drug development. 

Schools ‘not sure what to do’

Denise Morelli, of counsel at Sligo Law Group, a firm made up of former Education Department attorneys, said the department’s late June guidance lacks clarity, especially in spelling out any repercussions for schools and students if the agency prevails in court and can keep its “professional” degree definition.

“I do think that has an impact on schools and students because schools are, kind of, not sure what to do because now … these people in these programs are allowed to have the higher loans, according to the department, but the department’s not saying they can keep them,” said Morelli, a former attorney for the Office of the General Counsel at the department. 

“You could be partway through the program, the department prevails, now the student has to get their loan amount cut, and it could also affect their annual limits, so it puts both students and schools in a very precarious position right now,” she added. 

Student loan system overhaul

The new definition is part of President Donald Trump’s administration’s sweeping overhaul of the federal student loan system stemming from the GOP’s 2025 “big, beautiful” law. Most provisions in the overhaul took effect July 1. 

Part of the regulations axed a program allowing for unlimited borrowing for graduate and professional students and set new caps on federal student loans, with much different limits based on whether a degree is deemed “professional.” 

Now, graduate student loans face a $20,500 annual cap and $100,000 lifetime limit. Professional student loans are subject to a $50,000 yearly limit and $200,000 aggregate cap. 

Lawsuits crop up

The department’s new “professional” degree definition prompted a handful of legal challenges against the administration, including the suit that sparked Howell’s June order. 

That case stems from a pair of combined challenges brought by a total of eight groups representing people in fields outside of the department’s new “professional” definition. 

One of the lawsuits was brought in May by the American Association of Nurse Practitioners; the National Association of Pediatric Nurse Practitioners; the American Association of Colleges of Nursing; the Association of Schools and Programs of Public Health; the National Education Association; and the American Association for Marriage and Family Therapy. 

The PA Education Association and the American Academy of Physician Associates filed the other lawsuit in June.