Trump Admin Moves to Slash College Costs

Higher education has been one the fastest-growing expenses for American families over the past 40 years. A significant driver of skyrocketing prices has been uncapped access to federal student loans. For the last two decades, graduate students have been able to borrow up to the full cost of attendance, enabling colleges and universities to raise tuition and fees with few constraints while shifting the financial burden onto students.

As a result, the cost of higher education has become increasingly unaffordable for American families and has contributed to a student loan portfolio that has tripled to nearly $1.7 trillion, with nearly 25% of borrowers in default on their repayment obligations. At the same time, too many programs leave students and taxpayers with little or no return on their investment, even as institutions boast nearly $950 billion in endowment assets.

Thanks to President Trump’s Working Families Tax Cuts Act (the Act), new loan limits taking effect this summer will curb excessive borrowing and force institutions to evaluate their costs. These reasonable caps will help prevent borrowers from taking on debt they may struggle to repay while putting downward pressure on institutions to lower costs, making higher education more affordable for America’s students.

How does the Act impact federal student loans?

The Act affects both the Grad PLUS and the Parent PLUS loan programs and introduces reasonable loan caps on graduate-level federal student borrowing. Undergraduate student limits remain unchanged.

The Grad PLUS loan program, established in 2006, allows graduate students to borrow up to the full cost of attendance with no aggregate or lifetime limit. When introduced, it effectively removed federal borrowing caps for graduate students. Since then, both tuition and loan debt for graduate students has skyrocketed. Although graduate students make up a relatively small share of total borrowers, they account for a disproportionate share of the loan portfolio. For example, in 2024-25, graduate students represented 16.8% of borrowers but received 46.6% of total loan disbursements that year.

The Act eliminates the Grad PLUS program, and instead responsibly reinstates borrowing limits for graduate programs by introducing new annual and aggregate limits on federal student loans for graduate and professional students beginning on July 1, 2026. Sensible limits will help curb overborrowing and put pressure on institutions to reduce costs, including unnecessary administrative spending.

The Parent PLUS loan program, established in 1980, allows parents to borrow up to the full cost of attendance to support their dependent undergraduate children. Beginning on July 1, 2026, the Act will place reasonable limits on the Parent PLUS loan program, which has contributed to historically high levels of debt that many parent borrowers have struggled to repay, a concern that researchers have raised for years.

What are the new borrowing limits for graduate students and parents of dependent students?

Under the Act, the new annual limits are as follows:

• For graduate students: $20,500
• For professional students: $50,000
• For parents with a qualifying dependent student: $20,000 per dependent student of the parent

Under the Act, the new aggregate limits are as follows:

• For graduate students: $100,000
• For professional students: $200,000
• For parents with a qualifying dependent student: $65,000 (per dependent student of the parent)
• All borrowers who receive a loan made on or after July 1, 2026, are subject to an aggregate lifetime loan limit of $257,500. Two exceptions to this include:
  • Grad PLUS loans that a borrower has received will be included in this new aggregate lifetime limit, unless the borrower qualifies for the interim exception, in which case they will continue to be subject to the former (pre-Act) limits during the interim exception period; and
  • Parent PLUS loans made to a borrower for their dependent students are excluded from a borrower’s lifetime limit.

What happens to a student enrolled in a graduate program prior to July 1, 2026?

For borrowers enrolled in a graduate program before July 1, 2026, and who have already received a loan for that program, an interim exception to the new loan caps will apply. These borrowers will continue to have access to loans on the same terms that they had when they entered the program until they graduate.

It is important to note that borrowers who cease enrollment or withdraw from the program will lose the interim exception and will be subject to the new annual and aggregate loan limits.

Why did the Act eliminate the Grad PLUS student loan program?

Virtually unlimited Grad PLUS borrowing has contributed to rising college costs. Economists find that unlimited federal student loans for graduate school raise tuition on a “dollar for dollar” basis, with institutions capturing much of the additional funding for themselves. Students bear the cost and often graduate with unaffordable debt.

More importantly, these loans have fallen short of their intended goal of expanding access to graduate education that delivers meaningful returns for students. Research shows that unlimited federal borrowing for graduate school has had little to no effect on access.

Simply put: Grad PLUS allows for high debt in graduate programs regardless of the actual cost of delivering the education or the outcomes of the program, such as earnings gains. The new loan limits will help prevent programs from leaving students with debt they may not be able to afford.

For example:

• Columbia University offers a master’s degree in theatre where students who take on federal loans leave with $132,000 in debt on average but earn just $58,000 four years after graduating.
• The University of Southern California offers a master’s degree in student counseling where students who take on federal loans leave with $118,000 in debt on average but earn just $77,000.
• Naropa University offers a master’s degree in psychology where students who take on federal loans leave with $105,000 in debt on average but earn just $45,000.
• New York University offers a master’s degree in film and video studies where students who take on federal loans leave with $168,000 in debt on average but earn just $47,000.
• The University of Denver offers a master’s degree in psychology where students who take on federal loans leave with $126,000 in debt on average but earn just $60,000.
• Creighton University offers a graduate degree in physical therapy where students who take on federal loans leave with $177,000 in debt on average but earn just $79,000.
• The University of Bridgeport offers a doctorate degree in alternative and complimentary medicine where students who take on federal loans leave with $175,000 in debt on average but earn just $39,000.
• Chapman University offers a master’s degree in drama and theatre arts where students who take on federal loans leave with $139,000 in debt on average but earn just $41,000.