New Student Loan Rules Are Here: $257,500 Lifetime Borrowing Cap, Lower Limits for Part-Time Students and What Families Need to Know

New federal student-loan rules are changing how much American students and parents can borrow for college and how they repay their debt.

New Rules Set Borrowing Limits

The changes apply to federal loans first disbursed on or after July 1, 2026, introducing lifetime borrowing limits for students and new caps on parent loans. The Wall Street Journal reported Friday that the rules are affecting families applying for financial aid this fall.

Federal student borrowers subject to the new rules face a $257,500 lifetime loan limit, which includes eligible undergraduate, graduate and professional borrowing.

Annual undergraduate loan limits remain unchanged.

Students who enroll part-time will have lower annual loan limits, while colleges can set lower borrowing caps for specific programs as long as the same limits apply to all students in those programs, according to the U.S. Department of Education’s Federal Student Aid office.

Undergraduate subsidized and unsubsidized loans carry a 6.52% fixed interest rate for loans first disbursed between July 1, 2026 and June 30, 2027. A 1.057% loan fee applies to loans disbursed before Oct. 1, 2027, according to the report.

Parent Loans Face New Restrictions

Parents borrowing through federal Direct PLUS loans for dependent undergraduate students face a $20,000 annual limit and a $65,000 aggregate cap per student, according to the U.S. Department of Education’s Federal Student Aid office.

Previously, parents could borrow up to the cost of attendance minus other financial aid.

Parent PLUS loans carry a 9.07% fixed interest rate for the July 2026 to June 2027 disbursement period, with a 4.228% loan fee for loans disbursed before Oct. 1, 2027, the report noted.

Repayment Options Also Change

Borrowers with federal loans first disbursed on or after July 1 must use the Repayment Assistance Plan (RAP) or Tiered Standard Plan.

RAP bases payments on income and dependents, while the Tiered Standard Plan considers the principal balance, interest rate and repayment term.

RAP offers forgiveness after 30 years, compared with 10 to 20 years under the previous plan for undergraduate debt. Parent PLUS borrowers taking out loans after July 1 must use the Tiered Standard Plan.

The changes follow other federal student-loan developments. On Oct. 1, the Education Department and Treasury launched an online support center for borrowers in default and extended the enrollment deadline for a temporary 1-percentage-point interest-rate reduction to Dec. 31.

Eligible borrowers enrolled in auto pay can receive a 1% interest rate reduction through June 30, 2028, according to the U.S. Department of Education.

Families May Turn to Private Loans

Student-loan professionals expect some families to turn to private loans as federal borrowing limits leave them with less funding for college.

Sarah Austin, a policy analyst at the National Association of Student Financial Aid Administrators, told the publication that some students will now face funding gaps they would not have faced under the previous rules.

Private loans are generally considered a last resort because their terms may be less favorable than federal loans. Their interest rates vary depending on the lender, the borrower’s credit history and whether the rate is fixed or variable, the report said.

Disclaimer: This content was produced with the help of AI tools and was reviewed and published by Benzinga editors.

Image via Shutterstock