New federal rules reshape student loans

Illustration by Lexi Forman, Cartoonist

The price of a college degree hasn’t gotten any smaller, but for some students, the amount they can borrow to pay for it has. New federal student loan rules are reshaping how students and families finance higher education — with graduate and professional students facing some of the biggest changes.

On July 1, new federal student loan rules took effect nationwide, changing how college students and families, including those at Chapman University, can borrow and repay federal loans to finance higher education.

The changes include new borrowing limits for graduate and professional students and Parent PLUS borrowers, the elimination of Graduate PLUS loans for new borrowers and the introduction of new repayment options.

While federal borrowing limits for undergraduate students remain unchanged, graduate students subject to the new rules can now borrow up to $20,500 annually, with a total federal borrowing limit of $100,000. Professional students can borrow up to $50,000 annually, with a $200,000 lifetime limit. 

Parents also face new limits. Parent PLUS loans are now capped at $20,000 per year and $65,000 in total per dependent student for borrowers subject to the new limits, according to the U.S. Department of Education.

For students who are just beginning graduate school, another major change is the end of Graduate PLUS loans for new borrowers.

The Graduate PLUS loan program previously allowed eligible graduate and professional students to borrow up to the remaining cost of attendance after other financial aid was applied. Students enrolled in a program before July 1 who had already received a federal loan for that program may qualify for a temporary exception to the new limits.

At Chapman, continuing graduate students who qualify for this exception, what the university calls “legacy” students, may continue receiving Graduate PLUS loans for up to three academic years or the remaining expected length of their current program, whichever is shorter. Undergraduate students and parents who meet similar requirements may also qualify for legacy status under the previous Parent PLUS borrowing rules.

While the full impact of the July 1 changes remains unclear, early indications suggest the effects at Chapman have been less dramatic than initially anticipated. 

Graduate students, particularly those in medical and professional programs whose costs far exceed the new federal borrowing limits, are expected to be among the most affected. 

The financial aid office has fielded questions from families navigating the new landscape, though the volume has been relatively routine. 

The changes also restructure how borrowers repay federal student debt. A new income-driven option, the Repayment Assistance Plan (RAP), calculates monthly payments based on a borrower’s adjusted gross income and number of dependents. Payments range from 1% to 10% of adjusted gross income, made monthly, with a minimum payment of $10. The monthly amount is reduced by $50 for each dependent claimed on the borrower’s federal tax return.

Under RAP, borrowers make qualifying payments for up to 30 years before any remaining balance may be discharged. The repayment options available to individual borrowers depend on the types of federal loans they hold and when those loans were disbursed.

Sean Crockett, a clinical associate professor of economics, said the tighter graduate borrowing limits could affect how students finance degrees that cost more than the amount available through federal loans.

Students who cannot cover the remaining cost themselves could face a choice between seeking financing elsewhere and reconsidering whether to attend. 

“If you have to borrow to go to school, you will have to go to a private loan or not go,” Crockett said.

Chapman’s Graduate Financial Aid Office currently advises students beginning programs after June 30 who need funding beyond the new federal limits to consider private loans.

Unlike federal loans, private loans are typically credit-based and can carry different interest rates and repayment terms depending on the lender. For many Chapman families, however, finding a way to finance their child's education remains a priority regardless of the obstacles, and the university expects to continue helping undergraduates navigate borrowing options in their own names as the landscape shifts.

Crockett said the changes could also have broader economic effects on the cost of higher education. He told The Panther that access to student loans increases the amount students can pay for college, potentially placing upward pressure on tuition. Limiting the amount available to borrow could create pressure in the opposite direction.

“If you limit student loans, you’re going to have less increasing tuition than would have been otherwise,” Crockett said.

The Department of Education has said the new borrowing limits are intended to put pressure on colleges and universities to reduce costs. How individual institutions respond to the restrictions, however, will depend on factors including tuition, institutional aid and how students choose to finance their education.

For an institution like Chapman, however, reducing tuition is not as straightforward as the policy might suggest. Chapman's cost of attendance reflects the full scope of what the university offers, including a residential campus, athletics and small class sizes that allow for a more personalized education.

For current Chapman undergraduates, federal Direct Subsidized and Unsubsidized Loan limits remain unchanged. Current students and parents who received qualifying federal loans before July 1 may also be eligible for legacy status, allowing them to remain under previous Parent PLUS borrowing rules for a limited time. 

Students who do not qualify for legacy status face the new Parent PLUS limits, while federal repayment options depend on the types of loans a borrower holds and when those loans.

For Chapman students unsure of how the new rules apply to their situation, the financial aid office remains the best first stop. 

Whether navigating legacy status, exploring repayment plan options or weighing private loan alternatives, students are encouraged to reach out directly. 

"Our goal is to help students finance their education while supporting their long-term financial well-being," the university said in an official statement. 

The office may not always be able to offer additional funding, but it can help students understand what options are still available to them.