New Federal Student Loan Rules Took Effect

July 1, 2026

Here’s What Grad Students Need to Know

Last updated: July 1, 2026. Some provisions below are subject to active litigation and could change — see the callouts throughout.

If you're planning to go to graduate or professional school, the rules for paying for it just changed. On July 1, 2026, new federal student loan regulations took effect under the Reimagining and Improving Student Education (RISE) Final Rule, which implements loan provisions from the reconciliation law signed in July 2025 — originally named the One Big Beautiful Bill Act (OBBBA) and more recently rebranded by the administration as the Working Families Tax Cuts Act. Both names refer to the same law (Public Law 119-21); this article uses “OBBBA,” the name still most widely used in coverage of these changes. The new rules eliminate the Graduate PLUS Loan program, cap how much you can borrow, and replace most income-driven repayment plans with two new options.

These changes affect anyone taking out a new federal loan on or after today. If you're applying to grad school for fall 2026 or later, or you're a current student who will need additional loans to finish your program, this is the guide to what changed and what to do next.

• Graduate PLUS Loans are eliminated for new borrowers as of July 1, 2026.
• New borrowing caps apply: a $257,500 aggregate lifetime federal loan limit for all borrowers (Parent PLUS excluded), plus new annual/lifetime limits specifically on Direct Unsubsidized Loans for graduate and professional students.
• Loan limits differ by program type. General graduate programs (most master's degrees, including the MBA) are capped at $20,500/year and $100,000 total. The 11 statutory “professional degree” fields — including law (J.D.) and medicine — get a higher $50,000/year and $200,000 total cap.
• The MBA is not classified as a professional degree under the new rules, despite the “M” — MBA students borrow under the lower general graduate cap.
• Parent PLUS Loans are now capped at $20,000 per student per year and $65,000 per student over a lifetime.
• Repayment plans changed: new borrowers can only choose between the Repayment Assistance Plan (RAP) and the new Tiered Standard Plan. SAVE, PAYE, and ICR are being phased out.
• A legacy provision lets some borrowers keep borrowing under the old Grad PLUS rules for up to three more academic years (or until program completion), if continuously enrolled in the same program they were already in before July 1, 2026.
• Roughly 7–7.5 million borrowers currently on the SAVE plan are being notified they have 90 days to pick a new repayment plan or be auto-enrolled in one.

Before July 1, 2026, graduate and professional students could borrow up to their full cost of attendance through the Graduate PLUS Loan program. That option is now gone for new borrowers.

In its place, the new rules set hard borrowing ceilings:

• $257,500 aggregate lifetime limit on federal student loans, combining undergraduate and graduate borrowing, for all borrowers (Parent PLUS loans are excluded from this cap — see below).
• New annual and lifetime caps on Direct Unsubsidized Loans specifically for graduate and professional students, replacing the old “borrow up to cost of attendance” model.

For students in expensive graduate and professional programs — law, medicine, business, and beyond — this is the change that matters most. Full cost of attendance at many of these programs already exceeds the new caps, meaning federal loans alone may no longer cover the bill. (The exact limit depends on your program type — see the breakdown below.)

If you received a federal Direct Loan or Grad PLUS disbursement before July 1, 2026, and you stay continuously enrolled in the same program at the same institution, you can generally keep borrowing under the old Grad PLUS rules for up to three more academic years or the remainder of your program, whichever is shorter. Changing programs, degrees, or schools — or taking a leave of absence — after July 1, 2026 ends this eligibility. The legacy pathway itself sunsets entirely by June 30, 2029.

One important wrinkle: the Department of Education has said that Grad PLUS debt you already borrowed does count against your new $257,500 lifetime limit once you're no longer covered by the legacy provision (a reversal of its earlier guidance). Parent PLUS loans, by contrast, are not counted toward that $257,500 limit at all — they have their own separate caps (below). If you're mid-program, check with your financial aid office before assuming you know which rules apply to you; this is one of the more actively debated parts of the rollout.

Your specific degree — not just whether it's a master's or a doctorate — determines which borrowing cap applies. The new rules sort every borrower into one of two buckets: general graduate or professional.

The overall $257,500 lifetime cap (combining undergraduate and all graduate/professional borrowing) still applies on top of these program-level limits. If you complete a general graduate degree and later enter a professional program, your aggregate limit can step up to $200,000 — minus whatever you already borrowed at the graduate level.

Most master's degrees (MA, MS) and research doctorates (Ph.D., Ed.D.) that aren't on the government's professional-degree list fall into the standard graduate bucket: $20,500 per year, $100,000 total for the program. This is the same cap that applied broadly to graduate borrowers before, just without the Grad PLUS option to go beyond it.

Despite the name, the MBA is not one of the 11 fields classified as a “professional degree” under the new rules — so MBA students borrow under the lower general graduate cap: $20,500/year, $100,000 aggregate. For a two-year, full-time MBA at many top programs, total cost of attendance can run well past that limit, meaning MBA applicants are likely to face one of the largest funding gaps of any program type under the new rules.

One practical note for prospective MBA students: a growing number of business schools now accept the GRE in place of the GMAT for admission. If federal loans won't stretch to cover your full program cost, the strength of your application — including your GRE score — plays a bigger role in whether you land a scholarship, assistantship, or funded seat that closes the gap.

Students in the 11 statutory professional fields — pharmacy, dentistry, veterinary medicine, chiropractic, law, medicine, optometry, osteopathic medicine, podiatry, theology, and clinical psychology — get the higher cap: $50,000 per year, $200,000 aggregate.

Important, developing detail: a federal court preliminarily stayed part of the Department of Education's professional-degree definition on June 24, 2026. For the duration of that stay, the Department is treating an expanded interim list of programs — including several nursing, physician assistant, physical therapy, and audiology programs — as “professional” for loan-limit purposes, while litigation continues. This list could change again as the case proceeds, so students in health fields outside the original 11 should confirm their current classification with their financial aid office or the Federal Student Aid professional-degree list before finalizing a funding plan.

Law is one of the original 11 statutory professional fields, so J.D. students borrow under the higher cap in both the original rule and the current interim court list: $50,000 per year, $200,000 aggregate. At many private law schools, full cost of attendance still exceeds this cap even at the higher limit — and the overall $257,500 lifetime ceiling applies on top of it if you're carrying undergraduate debt or borrowed for an earlier graduate degree.

“Doctoral” isn't a single borrowing category. A Ph.D. or Ed.D. in a non-clinical field is treated as a general graduate degree ($20,500/$100,000), while a clinical or licensure doctorate on the professional list — M.D., D.O., Pharm.D., D.V.M., Psy.D., and (currently, on an interim basis) degrees like the D.N.P. — falls under the professional cap ($50,000/$200,000). If you're weighing a doctoral program, check the specific CIP code and degree designation your school reports, not just the “doctoral” label, to know which limit applies to you.

Parents borrowing on behalf of a dependent undergraduate now face:

• $20,000 per year, per student
• $65,000 lifetime, per student

Previously, Parent PLUS loans also had no cap beyond cost of attendance. Families who were counting on Parent PLUS to close a funding gap should recalculate their plan now.

The second major change is on the repayment side. For loans disbursed on or after July 1, 2026, borrowers no longer have access to the old income-driven repayment plans. Instead, there are two options:

RAP is the new income-driven plan, and it's the only income-driven option available to new borrowers:

• Monthly payments are based on a percentage of adjusted gross income (AGI), generally ranging from 1% to 10% depending on earnings, with a $10/month minimum payment.
• Payments are reduced by $50/month per dependent.
• Interest waiver: if your on-time payment doesn't cover that month's accrued interest, the remaining interest is waived rather than added to your balance.
• Principal-match subsidy: if your on-time payment doesn't reduce your principal by at least $50, the Department adds a matching payment (up to $50) toward your principal.
• Remaining balances are forgiven after 360 qualifying, on-time payments (30 years). Payments made under RAP also count toward Public Service Loan Forgiveness (PSLF), which — under PSLF's standard rule — forgives remaining balances after 120 qualifying payments (10 years) for borrowers working for a qualifying employer.
• RAP is not available for Parent PLUS Loan debt.

The Tiered Standard Plan is a fixed-payment plan with no income-based adjustment and no forgiveness. Your repayment term depends on your total loan balance:

Minimum payment is $50/month (or your full balance if it's under $50).

If you have no new federal loans disbursed on or after July 1, 2026, you can generally stay on your current Standard, IBR, Graduated, or Extended plan, or opt into RAP if you prefer. Two different clocks are running for borrowers who need to move off a plan, though:

• SAVE borrowers (roughly 7–7.5 million people): the SAVE plan itself has been blocked by the courts and is being wound down on its own, faster timeline. Starting around July 1, 2026, loan servicers are notifying SAVE borrowers that they have 90 days to choose a new plan (RAP, IBR, ICR, or the Standard/Tiered Standard plan). Anyone who doesn't choose within that window is automatically enrolled in the Standard or Tiered Standard plan.
• PAYE and ICR borrowers with loans from before July 1, 2026: these plans stop accepting new enrollees as of July 1, 2026, but existing PAYE/ICR borrowers can keep using them until July 1, 2028, at which point anyone still enrolled is automatically transitioned to IBR or RAP. Qualifying payments already made carry over toward forgiveness in the new plan.

One important catch: if you take out even one new loan after July 1, 2026 — including as a graduating senior heading to grad school — all of your loans, including older ones, get repaid under the new rules.

Put together, these changes mean two things for anyone applying to or currently enrolled in a graduate or professional program:

1. Federal loans may not cover the full cost of your program anymore. With Graduate PLUS gone and a hard lifetime cap in place, you may need to plan for a funding gap — through savings, employer tuition assistance, fellowships, assistantships, or (with caution) private loans.
2. Getting into a funded program, or qualifying for merit-based aid, matters more than it used to. Competitive admission and scholarship eligibility can meaningfully offset what federal loans no longer cover.

• Run the numbers. Add up your expected total federal borrowing against the new $257,500 aggregate cap before you commit to a program.
• Check legacy eligibility. If you're mid-program, ask your financial aid office whether you qualify for the Graduate PLUS legacy provision.
• Build a funding plan before you apply, not after you're accepted — don't assume PLUS loans will close the gap the way they used to.
• Strengthen your admissions profile. A strong application — including a strong GRE score — can open doors to funded seats, assistantships, and merit scholarships that reduce how much you need to borrow in the first place.

If you're weighing whether a stronger GRE score is worth the prep time, this is one of the clearest financial arguments for it yet: every dollar of merit aid or funded-program access you qualify for is a dollar you don't have to borrow under these new, tighter limits.

See how GRE prep can strengthen your grad school funding options →

When did the new federal student loan rules take effect?

July 1, 2026, under regulations implementing the One Big Beautiful Bill Act (OBBBA).

What is the new lifetime student loan limit?

$257,500 in aggregate federal student loan borrowing across undergraduate and graduate/professional loans combined, for borrowers subject to the new limits. Parent PLUS loans are not counted toward this cap — they have their own separate $65,000-per-student lifetime limit.

Is the Graduate PLUS Loan really gone?

Yes, for new borrowers. Graduate and professional students who received a Direct Loan or Grad PLUS disbursement before July 1, 2026 and stay continuously enrolled in the same program can keep borrowing under the old rules for up to three more academic years or until they finish the program, whichever comes first.

Does my old Grad PLUS debt count against the new $257,500 limit?

Yes. The Department of Education has said that Grad PLUS loans borrowed before July 1, 2026 count toward your $257,500 lifetime limit once you're no longer covered by the legacy provision — a reversal of its earlier position. Parent PLUS loans are not counted toward this limit.

What repayment plans are available for new loans after July 1, 2026?

Only two: the Repayment Assistance Plan (RAP), an income-driven plan, and the Tiered Standard Plan, a fixed-payment plan with terms of 10–25 years based on loan balance.

Do I have to switch off the SAVE plan?

Yes. SAVE has been blocked by the courts, so borrowers on it are being notified starting around July 1, 2026 that they have 90 days to choose a new plan (RAP, IBR, ICR, or Standard/Tiered Standard) before being auto-enrolled in the Standard or Tiered Standard plan. PAYE and ICR are on a slower timeline: existing borrowers can stay on them until July 1, 2028, when remaining enrollees move automatically to IBR or RAP.

What happened to Parent PLUS loans?

They're now capped at $20,000 per student per year and $65,000 per student over a lifetime.

Is an MBA considered a professional degree under the new rules?

No. The MBA is not among the 11 statutory professional degree fields, so MBA students borrow under the general graduate cap: $20,500/year, $100,000 aggregate.

What's the federal loan limit for law school (J.D.)?

Law is a statutory professional degree, so J.D. students can borrow up to $50,000/year with a $200,000 aggregate limit.

Are nursing, PA, or other health degrees considered professional programs?

As of a June 2026 federal court order, several additional health programs (including select nursing, physician assistant, physical therapy, and audiology degrees) are being treated as professional on an interim basis while litigation continues. Confirm current status with your financial aid office, since this list may change.

This article summarizes complex federal regulations and isn't financial or legal advice. For authoritative, up-to-date details specific to your situation, check:

• U.S. Department of Education: One Big Beautiful Bill Act Updates — official federal student aid guidance
• studentaid.gov: OBBBA Key Definitions
• Federal Register: Final Regulations — the full final rule
• U.S. Department of Education: Fact Sheet on Simplified Repayment (June 9, 2026) — official RAP and Tiered Standard Plan details
• U.S. Department of Education: RISE Final Rule Fact Sheet (PDF) — official summary of the loan limit and professional-degree rules
• Federal Student Aid: Interim List of Professional Degree Programs (Court Order Update) — current, subject-to-change classification of which degrees count as “professional”
• Federal Student Aid: Dear Colleague Letter GEN-25-04 — provisions effective upon enactment, including PSLF and RAP
• Your school's financial aid office, for questions about the legacy provision, your specific loan history, or your program's current professional/graduate classification

Note: some details in this article — particularly whether older Grad PLUS debt counts against the new lifetime limit, and which health-profession programs count as “professional” — have shifted more than once as the Department of Education has issued and revised guidance, and remain subject to ongoing litigation. Confirm time-sensitive specifics directly with your financial aid office before making borrowing decisions.

And if you're weighing how a stronger GRE score fits into your grad school funding strategy:

• ETS: GRE General Test