US Unveils Sweeping Student Loan Reforms Under 'One Big Beautiful Bill Act'
In a significant move set to reshape higher education financing, the US Department of Education has officially detailed comprehensive changes to the federal student debt programme. These reforms are aligned with President Donald Trump's 'One Big Beautiful Bill Act' (OBBBA), which was signed into law in July 2025. The new regulations, finalised after negotiated rulemaking sessions in September and November, aim to impose 'commonsense limits' on borrowing and simplify the notoriously complex repayment system for millions of Americans.
Key Highlights of the OBBBA-Aligned Student Debt Changes
The department's Reimagining and Improving Student Education (RISE) Committee reached a consensus on a full package of changes. A central feature is the elimination of the Grad PLUS programme, which officials argue fuelled unsustainable borrowing. Additionally, Parent PLUS Loans will now face a cap.
For new borrowers, the government has set strict annual and aggregate limits. Graduate students can now borrow a maximum of $20,500 per year, with a total cap of $100,000. The committee also defined a new category for professional students, who will be subject to a $50,000 annual loan limit and a $200,000 aggregate limit.
Nicholas Kent, the Under Secretary of Education, stated that these changes are designed to simplify the repayment maze and better align academic pursuits with workforce demands. He emphasised that the overhaul will 'hold universities accountable for outcomes' and exert 'significant downward pressure on the cost of tuition', ultimately protecting borrowers from degrees that do not offer a good financial return.
Impact and Next Steps for Students and Borrowers
With these changes scheduled to take effect in July 2026, the landscape of American higher education debt is poised for a major shift. This is crucial for the 42 million Americans who collectively hold approximately $1.7 trillion in student loans.
According to Alex Beene, a financial literacy instructor at the University of Tennessee at Martin, borrowers must stay vigilant. He notes that many existing forgiveness programmes will be consolidated into a new Repayment Assistance Plan (RAP), which, while offering relief based on income, will still require a minimum monthly payment. Beene advises that students and families will need to re-evaluate their financial planning, potentially considering more stable career paths or different degrees that ensure the ability to repay loans under the new, stricter system.
