Federal Student Loan Rules Set New Lifetime Borrowing Cap and Stricter Parent PLUS Limits
New federal student loan regulations introduce a $257,500 lifetime borrowing cap for undergraduate, graduate, and professional loans disbursed on or after July 1, 2026. The updated rules also lower annual limits for part-time students and permit higher education institutions to set lower program-specific borrowing ceilings. Meanwhile, Parent PLUS loans face new restrictions, capped at $20,000 per year and $65,000 in total per student, replacing previous rules that allowed parents to borrow up to the cost of attendance minus aid.
For loans disbursed between July 1, 2026, and June 30, 2027, fixed interest rates are set at 6.52% for undergraduate borrowing and 9.07% for Parent PLUS loans. Borrowers taking out federal loans after July 1 must select between the Repayment Assistance Plan (RAP) and the Tiered Standard Plan. RAP calculates payments based on income and family size but extends loan forgiveness to 30 years, compared to the 10 to 20 years available under older income-driven plans. Parent PLUS borrowers taking out new loans must enter the Tiered Standard Plan.
Lower federal borrowing caps are expected to create funding shortfalls for higher education, potentially pushing more families toward private student loans to cover remaining college costs. Borrowers can also access an online support center for default assistance and enroll in auto-pay by December 31 to secure a 1 percentage point interest rate discount running through June 30, 2028.
Key points
- A new federal rule imposes a $257,500 lifetime loan cap covering undergraduate, graduate, and professional borrowing starting July 1, 2026.
- Parent PLUS loans are capped at $20,000 annually and $65,000 in aggregate per student, with fixed interest rates set at 9.07%.
- New borrowers must choose between the Repayment Assistance Plan and Tiered Standard Plan, with loan forgiveness extended to 30 years under RAP.
- Lower federal limits may leave families with funding gaps, potentially increasing reliance on private loans to cover college costs.
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What is the new lifetime borrowing cap for federal student loans?
Federal student loan rules establish a lifetime borrowing limit of $257,500 per borrower, which encompasses eligible undergraduate, graduate, and professional studies for loans disbursed on or after July 1, 2026.
How do the new rules affect Parent PLUS loan borrowing limits?
Parent PLUS loans are now capped at $20,000 annually and $65,000 total per student. Previously, parents could borrow up to the cost of attendance minus other financial aid.
What repayment plans are available for loans disbursed after July 1, 2026?
Borrowers must choose between the Repayment Assistance Plan (RAP) and the Tiered Standard Plan. RAP bases payments on income and family size, with loan forgiveness granted after 30 years.