Starting July 1, 2026, the federal government is capping how much graduate students and parents can borrow for college. The Federal Grad PLUS loan is being eliminated, and Federal Parent PLUS loans will carry fixed annual and aggregate limits for the first time. For families who have relied on these programs to cover the full cost of attendance, the way they pay for college is about to change.
When federal borrowing falls short, families turn to private student loans. A new analysis of federal student aid data suggests that shift could be substantial: private student loan volume may increase by as much as 85%, nearly doubling from current levels.
That works out to roughly $11.2 billion in additional borrowing that would have run through federal programs under the old rules.
The increase will not happen all at once. It phases in over three years as current borrowers finish their programs under the old limits, and it affects a relatively small share of people — about 9% of graduate students, 30% of professional students, and 1% of parents.
But for those families, private loans are about to take on a far bigger role in financing a degree.
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New Loan Limits
Starting on July 1, 2026, the federal student loan limits are changing for new borrowers.
The Federal Grad PLUS loan has been repealed and replaced with higher annual and aggregate loan limits for Federal Stafford Loans to graduate and professional students.
- Graduate students: $20,500 annual limit, $100,000 aggregate limit
- Professional students: $50,000 annual limit, $200,000 aggregate limit
Students eligible for the higher professional degree limits include students enrolled in 11 degree programs, including Law (LLB or JD), Medicine (MD), Pharmacy (PharmD), Dentistry (DDS or DMD), Veterinary Medicine (DVM), Clinical Psychology (PsyD or PhD), Chiropractic (DC or DCM), Optometry (OD), Osteopathic Medicine (DO), Podiatry (DPM, DP, or PodD) and Theology (MDiv, or MHL).
The Federal Parent PLUS loan now has fixed annual and aggregate loan limits, instead of being effectively unlimited like before. There is a $20,000 annual limit and $65,000 aggregate limit per dependent student. These limits are per student, not per parent, regardless of how many parents borrow.
The annual and aggregate loan limits for undergraduate students have not changed, except that the annual limits are reduced on a prorate basis for students who are enrolled on less than a full-time basis.
Old borrowers who are enrolled in a program on June 30, 2026 and who previously borrowed federal student loans for that program may continue borrowing under the old loan limits for the remaining time to completion or three years, whichever is sooner.
The new loan limits will lead to lower federal student loan borrowing for some students. Many of these students will shift some borrowing to private student loans.
Borrowing Beyond Federal Limits
The best source of data to estimate the impact of the new federal loan limits is the 2019-2020 National Postsecondary Student Aid Study (NPSAS). Calculating the excess of borrowing that year beyond the new loan limits can provide an estimate of new private student loan borrowing.
The actual increase in private student loan borrowing will likely be lower, since some federal student loan borrowers will not be able to qualify for a private student loan and some will enroll in lower-cost colleges, such as in-state public colleges.
There are two ways of calculating the excess. One involves comparing federal student loan borrowing in 2019-2020 with the annual loan limits and the other involves comparing the cumulative federal student loan debt at graduation with the aggregate loan limits. The latter yields a lower figure, since not every student graduates. The annual loan limits are also more restrictive, especially for graduate students.
This table shows the excess borrowing in 2019-2020 beyond the new annual and aggregate loan limits.
Federal Student Loan Type | Annual Limits Excess | Aggregate Limits Excess |
|---|---|---|
Graduate | $6,246,609,236 | $3,248,407,344 |
Professional | $2,615,456,047 | $2,209,340,861 |
Parent | $2,295,224,335 | $2,210,307,986 |
Total | $11,157,289,638 | $7,668,056,191 |
So, the maximum total private student loan borrowing will be up to about $11.2 billion.
Based on the NPSAS, the total annual private student loan borrowing was $13.2 billion in 2019-2020. $10.2 billion of the total is from undergraduate students and $3.0 billion is from graduate and professional students.
The ratio of the excess federal student loan borrowing to the annual private student loan borrowing represents a potential 85% surge in private student loan volume. This increase will be effectively phased in over a three-year period as the number of borrowers who are grandfathered in under the old loan limits decreases.
Even though the dollar amount of excess borrowing is significant, only 9% of graduate students, 30% of professional students and 1% of parents will have to shift borrowing from federal to private student loans.
Practical Tips
With the expected decrease in the availability of federal student loans, students may need to reduce their reliance on federal student loans and increase their likelihood of qualifying for a private student loan. Here are a few tips on how families can navigate the changing landscape.
Strategies to Lower College Costs
- Enroll at a less expensive college, such as an in-state public college, to reduce the need to borrow.
- Reduce housing costs by getting a roommate to split the rent.
Strategies to Reduce the Need for Student Loan Debt
- Apply for scholarships and fellowships. Every dollar you win is a dollar less you’ll have to borrow.
- Borrow only what you need, not as much as you can.
- Save for college in a 529 college savings plan. Every dollar you save is a dollar less you’ll have to borrow.
- Consider employer tuition assistance, where your employer may pay part of your college costs.
- Use tuition installment plans, which split up the college tuition bills into equal monthly payments over the course of a year. Tuition installment plans do not charge interest, but do charge an up-front fee that is typically less than $100.
- Ask for financial help from friends and family.
Strategies to Qualify for a Private Student Loan
- Review your credit history at least 30 days before applying for a private student loan and correct any errors by disputing them. Creditors have 30 days to remove the disputed information from your credit report or confirm its accuracy. Eliminating inaccurate information can increase your odds of qualifying for a private student loan and reduce the interest rate you will be charged. You can review your credit history for free at annualcreditreport.com.
- Shop around for a private student loan with a lower interest rate. You need to apply for several loans (preferably with soft credit inquiries or a student loan comparison tool), as the lowest advertised interest rate is not necessarily the interest rate you’ll pay.
- Apply for a private student loan with a creditworthy cosigner. A cosigner with an excellent credit score and low debt-to-income ratio not only increases the odds of qualifying for a private student loan, but can also yield a lower interest rate. According to Enterval, 96.7% of private student loans to undergraduate students and 74.2% of private student loans to graduate and professional students involve a cosigner.
The analysis in this article is based on the following variables from the National Postsecondary Student Aid Study (NPSAS): TFEDLN, FEDCUM2, PLUSAMT, PLUSCUM, PRIVLOAN, NFEDCUM1 and PROGSTAT.
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Editor: Robert Farrington
Mark Kantrowitz is an expert on student financial aid, scholarships, 529 plans, and student loans. He has been quoted in more than 10,000 newspaper and magazine articles about college admissions and financial aid. Mark has written for the New York Times, Wall Street Journal, Washington Post, Reuters, USA Today, MarketWatch, Money Magazine, Forbes, Newsweek, and Time. You can find his work on Student Aid Policy here.
Mark is the author of five bestselling books about scholarships and financial aid and holds seven patents. Mark serves on the editorial board of the Journal of Student Financial Aid, the editorial advisory board of Bottom Line/Personal, and is a member of the board of trustees of the Center for Excellence in Education. He previously served as a member of the board of directors of the National Scholarship Providers Association. Mark has two Bachelor’s degrees in mathematics and philosophy from the Massachusetts Institute of Technology (MIT) and a Master’s degree in computer science from Carnegie Mellon University (CMU).