The One Big Beautiful Bill Act was signed into law on July 4, 2025 by President Donald Trump. The bill features tax cuts, deductions for overtime pay and hundreds of other provisions. It also includes a significant shift in federal student lending set to take effect this July.
Federal student lending plays a central role in how students finance higher education. About 42.8 million borrowers hold federal student loans, totaling roughly $1.693 trillion in outstanding debt, according to EducationData.org.
Borrowing is more common among graduate students, with 61% taking out federal loans, compared with 28% of undergraduates. More than half of college graduates, 53.3%, use federal loans at some point, and the federal government lends about $87.2 billion annually to postsecondary students, including those in graduate and professional programs.
Current laws limit the amount of direct federal loans that students can take out. A dependent undergraduate student can borrow up to $27,000 over the first four years, with a total lifetime limit of $57,500. This amount has not changed since 2007 and 2008, and those will remain the same. What will change for undergraduate students is how much their families are able to take out using Parent PLUS loans. The new annual cap is $20,000 with a lifetime aggregate of $65,000 for Parent PLUS loans.
The major changes are occurring on the graduate front and other advanced degrees. The Graduate PLUS loan which allows graduate students to borrow up to the cost of attendance will be eliminated.
Graduate students will have a strict cap on student loans with an annual $20,500 borrowing limit and an aggregate cap of $100,000. That aggregate limit applies only to graduate borrowing and does not include loans taken out for undergraduate study.
Some professional programs will be allowed a higher borrowing threshold of up to $200,000. These programs are defined using the federal Classification of Instructional Programs, a standardized coding system used to organize and report fields of study. Under the proposed definition, degrees such as medicine, dentistry and law fall into this category.
Students pursuing other graduate or doctoral degrees outside of these designated professional fields would remain subject to the $100,000 cap.
The new limits reshape how graduate education is financed, raising questions about affordability and long-term financial outcomes.
Scott Cederburg, a professor of finance and the Thomas C. Moses Endowed Chair at the University of Arizona’s Eller College of Management, shared that the new caps could reduce borrowing for some students but could create new tradeoffs.
“On the one hand, the loan limits are going to, for many of the students, reduce the amount of student debt that they actually have coming out of school,” Cederburg said. “On the other hand putting in these caps on the federal loans, either people need to think carefully about which program they’re able to afford, or they’re going to go access private lending market where the rates are going to be higher.”
He added that shifting students toward private loans could increase long-term financial strain.
“In theory, somebody could come out with the same amount of debt and actually have higher payments with less of the loan forgiveness type of programs that exist for the federal loans,” Cederburg said.
Cederburg added that the changes reflect a broader policy shift toward reducing federal subsidies in education.
“This is a societal policy decision on, effectively, how much do we want to subsidize education from the federal government,” Cederburg said.
As federal protections shrink, private lending may play a larger role, but with greater risk.
“The private loans would be reflecting much more of the risk that the lenders are taking on,” Cederburg said, highlighting that borrowers may face higher interest rates and stricter requirements such as credit checks or co-signers.
He also warned the caps could limit access to certain careers.
“Some people are going to be entirely precluded from pursuing the occupation that they were planning to pursue,” Cederburg said.
The incoming changes have drawn mixed reactions.
Miranda Lopez, a graduate of the UA and former Southern Arizona regional director for the Arizona Students’ Association, shared that the changes could have broader consequences for access to higher education.
“This administration is continuing to gut funding for higher education,” Lopez said.
Lopez explained eliminating Graduate PLUS loans will significantly alter how students finance advanced degrees.
“It basically is forcing more people to go into debt,” Lopez said. “If you tell them that actually your potential debt would double or triple, they’re probably not going to want to do it.”
She added that the shift toward private loans could disproportionately affect younger borrowers.
“When you have students who are younger and haven’t necessarily experienced financial freedom, they’re more willing to sign up for some of those riskier loans,” Lopez said. “To them, the difference between 3% and 9% might not be a huge difference, but I wouldn’t want a 9% loan.”
Some students are already reconsidering their plans.
“I’ve been hearing people looking for other options,” Lopez said. “And then a lot of people who have decided ‘I’m not going to finish my Ph.D,’ or ‘I’m not going to, ultimately, it’s not going to be worth the cost.’”
While some policymakers argue that limiting federal loans could reduce tuition costs, Lopez stated that outcome is unlikely.
“That’s just not how this system works,” Lopez said, pointing to long-term declines in state funding for higher education as a primary driver of rising tuition.
Both Cederburg and Lopez agreed that the changes will ultimately reshape who can access graduate education.
University officials say the changes are still evolving. A UA spokesperson stated the institution is still monitoring the proposed changes.
In an email, UA spokesperson Mitch Zak said the Department of Education has outlined potential caps on Parent PLUS loans and the elimination of Graduate PLUS loans but emphasized that the rule is not final and “no changes have taken effect.”
As July approaches, students and families must weigh the cost of a graduate education against its potential return. New limits may reduce borrowing, but they also shift more of the financial risk onto individuals, making the decision to pursue an advanced degree less about access and more about whether the investment makes economic sense.
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