Why It Matters
Congress passed legislation that eliminates an entire borrowing option for graduate students, restricts repayment flexibility for new borrowers, and caps how much students can borrow. For millions of borrowers managing $1.6 trillion in outstanding Direct Loan Program student loans, these changes reshape the landscape of federal student aid.
The Big Picture
Graduate and professional students lost access to a key borrowing tool when Congress eliminated PLUS Loans for those populations effective July 1, 2026, under P.L. 119-21. Now, graduate students are capped at $20,500 per year in Direct Unsubsidized Loans, with an aggregate lifetime limit of $100,000. Professional students face a $50,000 annual cap and $200,000 aggregate ceiling. Parents of dependent undergraduates retain access to PLUS Loans, but at a higher price: the interest rate on Direct PLUS Loans for parents sits at 9.07 percent for loans made between July 1, 2026, and June 30, 2027.
That represents a sharp reduction from the broader menu available to borrowers who took loans before that date and avoid taking new ones. Those legacy borrowers retain access to multiple fixed repayment, income-driven, and alternative repayment plans. The income-driven repayment plans allow payments as low as $0 based on a percentage of income, with remaining balances forgiven after 20 to 30 years.
Interest rates for the 2026-2027 academic year reflect the formula Congress established: Direct Subsidized and Unsubsidized Loans for undergraduates carry a 6.52 percent rate, while Direct Unsubsidized Loans for graduate and professional students are set at 8.07 percent.
All borrowers face a lifetime maximum aggregate limit of $257,500 regardless of amounts repaid or forgiven.
Political Stakes
For Congress
By passing the One Big Beautiful Act, Congress moved toward stricter limits on federal borrowing and reduced flexibility in repayment, eliminating PLUS Loans for graduate students and restricting options for new borrowers.
The Department of Education's Office of Federal Student Aid continues administering the program, but with fewer borrowing pathways available to new borrowers.
For the Public
Graduate students cannot access PLUS Loans at any rate. New borrowers cannot access the full suite of repayment plans their predecessors enjoyed.
The Bottom Line
Congress fundamentally restructured federal student lending by eliminating graduate PLUS Loans, capping graduate borrowing at $20,500 annually and restricting new borrowers to two repayment plans instead of multiple options. The changes take effect immediately for loans made after July 1, 2026. The federal government bears the risk of losses from default or forgiveness under the Direct Loan program, making these policy choices consequential for the federal budget.
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