U.S. Education Department clears student-loan repayment overhaul for July rollout

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Student-loan repayment overhaul July

Highlights

The U.S. Department of Education will implement sweeping student-loan reforms in July 2025, including ending the Grad PLUS program and capping graduate loans at $100,000 and professional loans at $200,000.
The new rule introduces an annual $20,000 borrowing cap for Parent PLUS loans and narrows professional program eligibility from broader categories to just 11 specific fields such as law and medicine.
A new Repayment Assistance Plan (RAP) replaces all current income-driven plans, raises monthly payment obligations by hundreds of dollars for some borrowers, and sets a minimum $10 payment but eliminates more generous SAVE plan benefits.

Rule changes set borrowing and repayment limits

As announced by the U.S. Department of Education on Thursday, the final rule establishes four core changes to the federal student-loan system: ending the Grad PLUS program, imposing new loan limits for graduate and professional students, allowing schools to set their own caps tied to program value, and creating two new repayment plans.

Nicholas Kent, the department's undersecretary, says the changes are intended to preserve access to federal loans while reducing the risk that borrowers take on debt they cannot repay. The overhaul stems from Trump's spending legislation and was negotiated with stakeholders, including industry representatives and borrower advocates, at the end of 2025.

Under the final rule, the department sets a $100,000 lifetime cap for graduate students and a $200,000 cap for professional students. It also narrows the definition of professional programs to 11 fields, including law, medicine and dentistry, meaning some previously eligible programs such as postgraduate nursing no longer qualify under that category.

The department is also placing a first-time cap on Parent PLUS loans, which previously allowed parents to borrow up to the full cost of attendance. The new annual cap for parent borrowers is $20,000.

Borrowers face higher payment pressure

The administration is also rolling out a new Repayment Assistance Plan, or RAP, to replace existing income-driven repayment plans, including the SAVE plan, which it is eliminating. RAP waives unpaid interest and sets monthly payments at a minimum of $10, but its terms are less generous than those available under current plans.

According to Federal Student Aid projections cited in the announcement, the changes increase monthly payments for some borrowers by hundreds of dollars. Critics and student advocates warn the tighter federal caps could push some students toward private lending or lead them to abandon graduate or professional programs altogether.

Our earlier article on private student-loan lenders’ push to capture graduate borrowers explained how the planned end of Grad PLUS and new federal borrowing caps could drive more students toward private financing. It also noted that lenders are rolling out new products to fill the funding gap, while lawmakers and borrower advocates warn that a larger private-lending role may increase risks due to weaker oversight than federal programs.

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