Grad PLUS Loans cancelled, Parent PLUS capped — How new US student debt rules could impact you

The US Department of Education has issued a press release explaining changes to the government's student debt programme aligned with President Donald Trump's ‘One Big Beautiful Bill Act’ aka OBBBA.

The consensus was reached during negotiated rulemaking session held over two weeks in September and November, “to place commonsense limits and guardrails on future student loan borrowing and simplify the federal student loan repayment system.” it added.

The changes will come into effect from July 2026.

Donald Trump signed the OBBBA into law in July 2025, with provisions that his administration claims will “simplify the overly complex student loan repayment system and reform how future loans are made to students and families”.

Changes to student debt provisions aligned with OBBBA

In an official statement, the department said that it's Reimagining and Improving Student Education (RISE) Committee reached a consensus on the entire package of federal student loan-related changes as proposed by OBBBA.

According to Nicholas Kent, Under Secretary of Education, the changes will “simplify our complex student loan repayment system and better align higher education with workforce needs.”

He added that the move will “help drive a sea change in higher education by holding universities accountable for outcomes and putting significant downward pressure on the cost of tuition. This will benefit borrowers who will no longer be pushed into insurmountable debt to finance degrees that do not pay off.”

Here are the key highlights of what loans and systems have been removed, capped or updated.

US govt to implement OBBBA's loan provisions: Key highlights

• Aligning with OBBBA, the US education department has decided to eliminate its Grad PLUS programme, for fuelling “unsustainable student loan borrowing”.
• Further, it said that a cap has been imposed on Parent PLUS Loans, in order to “sunset the confusing maze of student loan repayment plans created by the Obama and Biden Administrations, and create a new and simplified Repayment Assistance Plan (RAP)”.
• Under the new rules, annual loans for new borrowers is capped at $20,500 for graduate students ($100,000 aggregate limit), and $50,000 for professional students ($200,000 aggregate limit) – a term the committee defined consistent with existing regulatory text.
• It said the changes were made as previous arrangements allowed students to “borrow up to the cost of attendance, which led institutions to offer expensive graduate programs with a negative return on investment.”
• Overall, the Committee reviewed and decided on 17 17 regulatory provisions, including changes to the RAP and the definition of a professional student. In response to suggestions from negotiators on the Committee, the Department made more than a dozen changes to its proposed regulatory language.

Impact: What should students do?

According to a Newsweek report, as many as 42 million Americans hold around $1.7 trillion in student loans.

Alex Beene, a financial literacy instructor for the University of Tennessee at Martin, told Newsweek that students will have to keep track of the changes, “for many years ahead”. He also noted that many who have already availed forgiveness programmes will have to check the status on being combined into a RAP.

“Many of prior forgiveness programs have been combined into a Repayment Assistance Plan, which will offer some additional relief to borrowers based on their income but still requires a minimum payment each month compared with prior debt relief products that have been introduced,” he said.

Beene further felt that students will have to rework their loan details under the new rules, and some may opt for “more stable” pathways or different degrees that offer financial security and ability to repay loans.