The One Big Beautiful Bill Act (OBBB), signed in 2025 and effective for most new loans on July 1, 2026, represents the most significant overhaul of federal student lending in decades. While undergraduate borrowing limits remain unchanged, graduate and parental loans will face far stricter caps, reshaping how families and students finance higher education.

Borrowing Caps Before OBBB

Under the pre-OBBB system, federal borrowing limits varied by loan type and educational level:

• Undergraduate students could take out Direct Subsidized and Unsubsidized loans with annual limits ranging from $5,500 to $12,500, depending on class year and dependency status. Lifetime caps were $31,000 for dependent students and $57,500 for independent students. These loans were the foundation of federal aid for most undergraduates.
  
• Graduate students faced an annual limit of $20,500 in Direct Unsubsidized loans, but could supplement this with Graduate PLUS loans up to the school’s cost of attendance (COA) minus other aid. In practice, this meant graduate and professional borrowers could finance nearly the full price of attendance, including living expenses, with no fixed annual or lifetime cap.
  
• Parent PLUS loans, used by parents of dependent undergraduates, offered similarly generous terms. Parents could borrow up to the student’s COA minus other aid each year, again with no annual or lifetime cap. This flexibility allowed many families to fill large funding gaps but also contributed to rising parental debt burdens.
  
• Lifetime borrowing limits across undergraduate and graduate loans typically reached $138,500 for many students, with certain medical or professional programs allowing even higher totals, sometimes exceeding $224,000.
  

This framework gave graduate students and parents substantial flexibility, but it also enabled very high federal debt levels, which OBBB seeks to curb.

Borrowing Caps After OBBB (New Loans Starting July 1, 2026)

OBBB keeps undergraduate loan limits unchanged, preserving the existing annual and aggregate maximums for Subsidized and Unsubsidized loans. However, it sharply reduces graduate and parental borrowing power:

• Parent PLUS loans will be capped at $20,000 per academic year per student, with a $65,000 lifetime maximum. Parents will no longer be able to borrow up to the full COA.
  
• Graduate PLUS loans will be eliminated for new borrowers. Graduate students will rely solely on Direct Unsubsidized loans, which retain the $20,500 annual limit but now carry a $100,000 lifetime cap.
  
• Professional degree programs—including law, medicine, and other high-cost fields—receive a separate ceiling of $50,000 per year and $200,000 lifetime.
  
• A new $257,500 universal lifetime cap applies across all federal student loans (excluding Parent PLUS). This replaces the previous system of program-specific aggregate limits.

Borrowers with existing Grad PLUS or Parent PLUS loans are grandfathered: they may continue borrowing under old rules for up to three academic years or until their current program ends, whichever comes first.

Implications for Students and Families

The OBBB Act preserves access for undergraduates but tightens graduate and parental borrowing dramatically. Parents will no longer be able to cover unlimited gaps between aid and the COA, and graduate students will lose the ability to finance the full cost of high-priced programs with federal loans. Medical and law students, who often relied on Grad PLUS to pay tuition and living expenses, may face funding gaps that require scholarships, institutional aid, or private loans.

While these changes aim to limit runaway federal lending and encourage cost control, they also shift more responsibility onto families and institutions to bridge the gap between tuition and available federal aid.

Additional Resources

• U.S. Department of Education. “Subsidized and Unsubsidized Loans.” Studentaid.gov
• The Institute for College Access & Success. “Federal Student Loan Amounts and Terms.” TICAS.org
• National Association of Independent Colleges and Universities (NAICU). “Frequently Asked Questions about the One Big Beautiful Bill Act.” NAICU
• University of California Law San Francisco. “Important Federal Student Loan Changes Effective July 1, 2026.” UCLA Law