Student Loan Changes 2026: New Caps & Rules Explained

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Student Loans Just Got a Major Overhaul: What You Need to Know About the Big Beautiful Bill Changes

Today, we are going to be talking about student loans and specifically what has changed with the big beautiful bill and its passage as it relates to student loans. This is going to be very interesting.

Let's dive in. I guarantee you, you either have student loans or you know somebody who does, but I bet you didn't know that roughly 60% of federal student loan borrowers are either in default, behind on their payments, or actually struggling to make meaningful progress on their debt.

In fact, the Federal Reserve is saying that more than 9 million student loan borrowers are facing substantial declines in their credit standing over the first quarter in 2025. In other words, things are really bad out there.

From Forgiveness to Personal Responsibility

This 870-page piece of legislation has been focused not just on federal spending, but also a focus has been on education and higher education specifically. This bill is ending the quote-unquote "unlimited borrowing era" for graduate students and is really taking a big shift away from Biden's forgiveness and is focusing more on personal responsibility.

I think it's reasonable for us to actually take a step back and look at this because what we have is basically a tuition inflation bubble. With unlimited federal borrowing, colleges have been allowed to raise prices as much as they want, because if students can borrow whatever school costs, then there's really no incentive for a school to control costs. Now, that's at least one devil's advocate view.

The Theory Behind the New Student Loan Cap

The student loan caps in the new bill, in theory, are going to force schools to justify their value proposition and could—could being air quotes—could drive down tuition prices. Because when students can borrow unlimited amounts of money, the true cost of education is truly hidden. And so the limits in this bill are intended to force both students and schools to take a step back and confront the actual affordability and in theory, create market pressure for a more reasonably priced program.

Make sense?

The Real-World Problem I See Every Day

I can tell you, I see this as people come to me—some of you, some of your children have come to me and I see the amount of debt that they're carrying from student loans, where we really cannot find jobs that justify $100,000 and $200,000 of student loan debt. I know a teacher who has over $100,000 of student loan debt. In no way, shape or form are we going to be able to get a wage as a teacher to justify that amount of debt.

So we as a nation have a problem. By and large, if we want an advanced degree, we have human beings with debt slavery. And the big beautiful bill is attempting to address that.

Forcing Better Career Planning

It's attempting to address that by actually encouraging people to have better career planning on the front end. When you can only borrow $100,000 for a graduate degree, you're forced to seriously consider what your return on investment is going to be in your career, rather than just following a passion without regard to the economics or the affordability of that degree.

And let's not forget that federally subsidized loans are actually a liability federally for both you and I because every dollar that is issued in federal student loans actually represents a risk to you and me as a taxpayer. So the government has essentially been co-signing unlimited debt with really high default rates. And so the big beautiful bill is attempting to put a cap on a taxpayer's exposure to bad educational investments. I hate to say it, but that's what they're trying to do.

The New Rules: What's Actually Changing

Let me give you the down low on the higher points of this part of the bill. The changes are taking effect July 1, 2026. So that timeline's crucial, especially if you know somebody who is in college and thinking about an advanced degree.

Regular graduate degrees are going to be capped at $20,500 a year or $100,000 in lifetime. Professional degrees like medical school or law school will have a cap of $50,000 a year or a $200,000 lifetime maximum. The grad plus loans are completely gone. They are no longer around.

As far as the parent plus loans, the parent plus loans are now capped at $20,000 a year and a maximum of $65,000 per child maximum. So overall, the new lifetime limit for federal student loans is $257,500 per person, which includes all undergrad and grad combined.

Simplified Repayment Plans

And now the repayment plans have gone from seven different options to two simple options. Number one is a standard plan where you have fixed payments for 10 to 25 years. Number two is a repayment assistant plan, which is 1 to 10% of your income, 30 years, and then forgiveness.

The Bottom Line

We do education planning in my office every day of the week. This is going to change the conversation. And if you want to have a conversation with me about your own student loans and or how you're going to pay for education for your children, let's talk.