From high school families to graduate students, new federal borrowing rules will shape how families afford higher education.

The Big Picture: What Is OBBB?

The cost of higher education has never been more scrutinized than it is today.  Currently, U.S. student debt surpasses $ 1.81 trillion, with about 92% held by the federal government.  A change in federal loan policy was discussed for years, but never enacted.  These new rules will alter the future of millions of current and future borrowers.

One Big Beautiful Bill (OBBB) represents one of the most significant shifts in federal student lending in years.  From high school seniors mapping out their college plans to graduate and professional students pursuing advanced degrees, these changes will ripple through nearly every stage of higher education.

This article breaks down how OBBB affects different groups of borrowers—students, parents, and professionals—both before and after the critical date of June 30, 2026.

High School Seniors and Below: Choosing a College Under New Federal Loan Limits

For high school seniors, OBBB could play a decisive role in shaping both where they enroll and how much they borrow.

Under current laws, students have limits on the amount of Direct Federal Loans, also known as Direct Stafford Loans.  These limits are very low considering the cost of college.  Traditional dependent undergraduate students are limited to only $27,000 over the first four years, with an aggregate lifetime loan limit of $57,500.  Those loan limits have not changed since 2007 and 2008.

The One Big Beautiful Bill (OBBB), after June 2026, will not change the student federal Direct Loan borrowing limits for undergraduate programs.  That will remain the same.

The problem for the student occurs because the bill will restrict families using Parent PLUS loans to supplement college expenses.  The new Parent PLUS loan limits for parents of undergraduates changes to an annual cap of $20,000 and a lifetime aggregate limit of $65,000 per student.

Under current rules, the Federal Parent PLUS loan limits are almost unlimited.  Parents with average credit can borrow up to the cost of attendance, less any financial aid received.  Current Federal PLUS loans require limited formal loan underwriting for approval.

With loan limits determining affordability, many students may reevaluate schools not only based on academics or location, but also on whether financial aid packages cover the gap left by capped borrowing.  As a result, more students may lean toward in-state public colleges or community colleges as safer, more affordable options.  More families may also need to cover this gap with private loans or alternative financing.

While this could help reduce overborrowing, it also risks narrowing opportunities for families with fewer resources.

$92,000 Federal Loan Cap for the First Four Years of College

For new borrowers starting after June 30, 2026, the student and parents will only be able to finance up to $92,000 over the first four years.  In the chart below, we can see how the annual and lifetime limits will work.

In the example below, the family has an annual funding shortfall of $30,000 after considering financial aid and family resources.  The student would then take the Federal Direct loans of $27,000 over the first four years.  The parents would use the Federal Parent PLUS for $65,000 over the first four years.  Leaving a financing shortfall of $33,000, which would require the parents to use a private student loan or an alternative loan, such as a home equity loan or a retirement plan loan.

These new loan limits represent a significant change from the current process, which has not received much attention.  If proper planning is not done now, students could go through the admission process and then discover that the college of their dreams is unaffordable due to the formal underwriting process required by private lenders.

Current College Students entering or in college 2025-2026

Traditional, dependent undergraduate students have a lifetime federal aggregate loan limit of $27,000 per year, and as outlined in the One Big Beautiful Bill Act (OBBB), Parent PLUS loans are capped at $65,000 per student.

For some students, these restrictions will become most impactful during their senior year of college, when they may discover that their remaining federal loan eligibility has been exhausted due to the new three-year limits found in the OBBB.

The limits can create a significant financial shortfall, jeopardizing the student’s ability to cover tuition, fees, and living expenses necessary to complete their degree at the college they plan to graduate from.

Using the example above, the three-year extension of the current PLUS loan rules applies to existing borrowers.  This group of borrowers could take a Parent PLUS Loan for the first year for $24,500 (Parent PLUS + Private) and repeat this process for the next two years.  The Parent PLUS loans would total $70,500.  This loan limit issue becomes a problem their senior year.  The parents would need to use all private loans, as they would exceed the $65,000 federal PLUS loan limit.

Families who face this cap may need to pursue private loans or alternative financing options, which typically carry higher interest rates and fewer repayment options.  Private loans also have an underwriting process and may require a cosigner.  Moreover, students who change majors, repeat courses, or extend their studies beyond the standard timeframe are particularly vulnerable, as the additional semesters required may also exceed the loan limits that can be extended.

Students and families will need to do more long-term planning as they balance these new loan limits.  The family timeline should consider the ages of children in the family, projected borrowing for parents, and years to retirement. This lack of planning is a risk that families will take if proper planning is not done or provided.

Graduate Students: Borrowing Before and After 2026

Graduate students pursuing master’s degrees face a unique challenge, as loan limits shift depending on whether they borrow before or after June 30, 2026.

Enrolled students who have a Grad PLUS Loan for their current program before July 1, 2026, will be permitted to continue borrowing under the prior regulations for a limited period.  It is for three years or the completion of their program, whichever comes first.  Under the transition period, the Grad PLUS program will formally expire on June 30, 2028.

For new Grad PLUS borrowers after July 1, 2026, this will not be true because Grad PLUS loans will be eliminated, as part of the new One Big Beautiful Bill Act (OBBBA).

Under the OBBBA, graduate students will have a stricter cap on any Direct Unsubsidized Loans.  The annual borrowing limit is $20,500 with a lifetime aggregate limit of $100,000.  This aggregate limit does not apply to any loans borrowed for undergraduate studies.

Some students may choose to accelerate their enrollment to take advantage of current borrowing rules.  After the deadline, as stated, stricter loan limits could force students to rely more on private loans or outside funding.

This transition period will not only affect how graduate programs are financed but also influence who feels confident enough to pursue them.

Medical & Professional Students: Facing the Biggest Shift

Perhaps the most profound impact will be felt by medical and professional students—those training to become doctors, lawyers, and other highly skilled professionals.

These programs often demand years of study with costs that easily surpass traditional loan limits.  Under OBBB, students may need to rely on private loans, institutional aid, or other creative financing options to cover the gap, as OBBB introduced lower federal loan limits.  The new federal borrowing cap for medical and professional students will be $50,000 per year, or a loan cap of $200,000.

While this could curb excessive borrowing, it may also create barriers for students from modest financial backgrounds, potentially reshaping the future workforce in these critical fields.

Parent PLUS and Cosigner Borrowers: Family Finances on the Line

Parents taking out Parent PLUS loans will also feel the effects of OBBB, with borrowing options evolving in ways that may expand or restrict family financial planning.  Before June 30, 2026, parents will still have the flexibility to cover the gaps left by federal student loan limits.

Under the previous system, Parents could borrow up to 100% of the Cost of Attendance, minus other financial aid, for their child’s education.  After the changes, however, reduced borrowing capacity could limit families’ ability to fund higher-cost schools.  This shift may place greater emphasis on scholarships, grants, and family savings as parents weigh the balance between supporting education and managing household debt and retirement goals.

Effective July 1, 2026, parents will need to rely on different loan options outside of the Federal government.  Even with the lower Parent PLUS loan limits, the accumulation of debt and cosigner loans will impact the formal loan underwriting process associated with those alternative loans.  In a formal loan underwriting process, a crucial factor is the borrower’s debt-to-income ratio.  This ratio has a direct relationship with the interest rate of the loans and the loan approval process.  Cosigning a loan will appear on both the borrower’s and cosigner’s credit reports.

Depending on your prior and future decisions, this ratio will likely worsen over time.  Future borrowing needs to be considered now, as the underwriting process was previously minimal for the Federal PLUS loan, including both Parent and Grad PLUS loans.

Final Thoughts on New Federal Limits In the OBBB 

The implementation of OBBB is more than a technical change in student loan rules—it’s a turning point in how students and families plan for higher education.

By reshaping borrowing limits for undergraduates, graduate students, parents, and medical professionals, policymakers will influence not only the financing of education but also the way families cover expenses.  Even outside these specific groups, every student loan borrower will feel the impact of OBBB.

As the June 30, 2026, deadline approaches, awareness and preparation will be critical.  Whether OBBB brings relief or new challenges, it underscores the ongoing challenge of balancing opportunity with affordability in higher education.

If the affordability and repayment process feels overwhelming, you may benefit from professional guidance.  The PayForED Find the Advisor network connects families with trained financial professionals who specialize in navigating financial aid and college payment strategies.  PayForED also has a suite of software tools to help families estimate these expenses.