The recent passage of the “Big Beautiful Bill” (OBBBA) is transforming how graduate students fund their education. With Grad PLUS loans being eliminated and federal repayment plans overhauled, both students and schools face critical challenges.

These comprehensive reforms have created uncertainty among graduate students and financial aid officers alike, who are left to navigate potential funding gaps and the impact these policy changes may have on enrollment. Because of the significant repercussions the Big Beautiful Bill will have on student loans—and the students and schools that rely on them to finance higher education—staying informed is critical. 

Graduate students and financial aid officers should understand how the Big Beautiful Bill’s impact on student loans may alter borrowing limits and repayment strategies and what alternative options are available for financing higher education.

Key Takeaways

• The Big Beautiful Bill eliminates Grad PLUS loans for new borrowers after July 1, 2026, requiring graduate students to seek alternative funding options.
• Federal borrowing caps for graduate and Parent PLUS loans have significantly decreased, potentially causing funding shortfalls.
• Economic hardship and unemployment deferments are going away, limiting borrowers’ repayment flexibility.
• Pell Grant eligibility expansion indirectly impacts graduate funding dynamics at many institutions.
• Increased 529 plan withdrawal limits offer additional flexibility for funding education costs.
• Ascent offers private graduate student loans to help graduate students shore up funding gaps and help schools secure financial support for their students in the wake of these unprecedented changes. 

Key Changes in the “Big Beautiful Bill” Affecting Student Loans

The Big Beautiful Bill’s extensive range of reforms is slated to completely shift federal student loan policies and impact a wide range of people, including:

• New and current borrowers
• Parents relying on federal loans
• Schools navigating financial aid programs

These latest changes to student loans are part of the Trump administration’s broader education reforms, which student borrowers, parents, and financial aid officers should monitor closely. 

The End of Grad PLUS Loans

One of the most impactful Big Beautiful Bill student loan changes is the termination of the federal Grad PLUS loan program. 

Grad PLUS loans, which will no longer be available to new borrowers starting July 1, 2026, allowed graduate students to borrow up to the total cost of attendance, minus any other financial aid received. Critics typically argued that these loans contributed significantly to rising student debt by encouraging excessive borrowing. In addition, they were accused of placing financial strain on students post-graduation.

To address these concerns, the bill replaces Grad PLUS loans with increased borrowing limits for Direct Unsubsidized Loans, albeit with lower overall limits. While the shift aims to control debt accumulation, it leaves many graduate students searching for alternative funding sources.

New Borrowing Caps

Under the Big Beautiful Bill college loan adjustments, borrowing limits for graduate students and Parent PLUS loans have decreased significantly. Graduate students now face stricter annual and aggregate caps, limiting their access to federal funds. Similarly, Parent PLUS loans, which helped parents bridge funding gaps for their dependent students, also face new limitations.

The caps on the various loans are as follows:

• $20,500 per year with a lifetime grad school cap of $100,000 for graduate students
• $50,000 per year with a lifetime cap of $200,000 for professional graduate students (e.g., medical or law school)
• $20,000 a year and $65,000 per child for parent PLUS borrowers

Changes to Pell Grant Eligibility

In contrast to cuts to other funding sources, the Big Beautiful Bill has expanded Pell Grant eligibility, increasing the number of undergraduate students eligible for this form of aid. The expansion of Pell Grants could indirectly affect graduate funding as institutions redistribute financial aid budgets or priorities. Schools may, for example, shift resources toward undergraduate students who now qualify for the expanded grants.

In practice, students who receive full scholarships from colleges or universities will no longer be eligible for additional funding via Pell Grants. Contrast that with students in workforce training programs, whose eligibility has increased. Where these grants could previously only pay for courses of less than 600 hours or 15 weeks, that eligibility has expanded.

Student Loan Repayment Plan Changes

Among the most notable student loan repayment plan changes under the bill is the removal of specific repayment plans, including the popular SAVE plan. Other casualties include Pay As You Earn (PAYE), Income-Based Repayment (IBR), and Income-Contingent Repayment (ICR) plans:

• SAVE (Saving on a Valuable Education): Caps payments at 5–10% of discretionary income and forgives remaining balance after 10–25 years. It replaced REPAYE and offers the lowest monthly payments for most borrowers. 
• IBR (Income-Based Repayment): Payments are 10–15% of discretionary income, with forgiveness after 20–25 years. Borrowers must demonstrate partial financial hardship. 
• PAYE (Pay As You Earn): Requires a partial financial hardship; caps payments at 10% of discretionary income, with forgiveness after 20 years. Only available to newer borrowers. 
• ICR (Income-Contingent Repayment): Payments are the lesser of 20% of discretionary income or a fixed 12-year repayment, adjusted for income. Forgiveness occurs after 25 years. Available to all Direct Loan borrowers. 

While eliminating these plans may simplify available federal repayment options, it reduces flexibility for borrowers. Graduate students, for example, should prepare for stricter repayment terms and limited choices moving forward.

Don’t panic, though. The phase-outs for these plans are somewhat slower, and current borrowers have until July 1, 2028, to switch to a new plan. Those 7.7 million Americans enrolled in the Biden-era SAVE plan will see interest on those loans resume on August 1, 2025.

Removal of Economic Hardship Deferment

Another critical aspect of the Big Beautiful Bill’s student loan changes is its elimination of deferment options for unemployment and economic hardship. Previously, borrowers experiencing financial difficulty could temporarily pause their federal loan payments. With these protections removed, borrowers must carefully plan to avoid financial distress during repayment periods.

Increased Withdrawal Limits on 529 Plans

Finally, the bill introduces higher withdrawal limits for 529 college savings plans. Families and students can now withdraw larger amounts each year without penalties, making 529 plans more flexible for offsetting education costs in the face of reduced federal aid. 

The law doubles the annual tax‑free withdrawal limit from $10,000 to $20,000 per beneficiary for K–12 qualified expenses, starting in tax year 2026.

What These Changes Mean for Graduate Borrowers

The student loan changes introduced by the Big Beautiful Bill present significant challenges to graduate students, specifically due to the loss of Grad PLUS loans. Students who use them took out nearly $32,000 last year, according to an analysis from Bloomberg. And because many of those students come from low-income backgrounds and minority communities, it would hit students with limited options the most.

These were key funding sources that covered comprehensive education costs. With reduced federal borrowing options, grad students must prioritize financial literacy and budgeting skills to manage their education expenses, especially with changes to student loan repayment plans.

Students must now emphasize evaluating their chosen degree programs’ return on investment (ROI). Paying close attention to school selection, tuition costs, and future earning potential will help them ensure manageable debt levels. Tools like Ascent’s College Degree ROI Calculator can help students assess the potential return on college investment based on school and major.

As federal funding tightens, grad students with strong credit histories will likely explore competitive private lending options to bridge funding gaps. Graduate school programs for a master’s degree can cost anywhere between $44,640 and $71,140, depending on the program and whether the school is public or private. These costs are even higher for medical and law school. And that’s just tuition; books, fees, and other cost of living expenses elevate the numbers even higher.

Graduate school scholarships and grants can help pay for school, but most won’t cover the full costs. That’s a significant disparity that leads to graduate students taking out hundreds of thousands of dollars in loans over their graduate career.

In this more restrictive funding environment, proactive financial planning and informed decision-making are critical. Students and families should leverage available resources and guidance to better navigate these challenging times.

What This Means for Schools and Financial Aid Offices

These developments also have big impacts on financial aid offices for universities with graduate programs. Because federal funding sources like Grad PLUS loans are being eliminated and borrowing limits decreased, graduate schools are expected to face increased pressure to help their students bridge substantial funding gaps.

To effectively manage these changes, financial aid offices will need to cultivate strong relationships with credible private lenders to ensure students maintain reliable access to essential funds. 

Ascent provides valuable resources for schools, offering flexible graduate loan solutions, career readiness training, and enhanced financial education. When schools partner with reputable private lenders like Ascent, they can mitigate these funding shortfalls to ensure their students remain financially supported through graduation.

Ascent is Here to Support Graduate Students Amid Federal Changes

With such significant shifts in federal student loan policies, graduate programs and their students are facing increasing uncertainty about how they’ll bridge new funding gaps. At Ascent, we’ve spent years working closely with schools and students to navigate complex financial landscapes. Our expertise allows us to offer flexible, customized private lending solutions specifically tailored to graduate education.

By partnering with Ascent, schools can confidently:

• Boost enrollment numbers by providing accessible graduate student loans that attract qualified students who might otherwise choose not to attend due to affordability concerns.
• Support underserved student populations who risk being unfunded in the wake of federal loan eliminations and lowered borrowing limits.
• Maintain financial stability and avoid disruptions caused by recent federal loan changes—allowing institutions to better plan, budget, and support their graduate cohorts without interruption.

Ascent’s commitment to enabling student success extends beyond funding alone. Students gain access to robust financial literacy resources, personalized career support through AscentUP, scholarship opportunities, and tools designed to strengthen students’ financial wellness throughout their graduate experience, and beyond.

Together, graduate schools and students can rely on Ascent to navigate these unprecedented times with stability, confidence, and clarity. Contact us to learn more about our private graduate student loans and support offerings for grad students and schools. 

FAQs

How does the Big Beautiful Bill impact graduate student loans?

The Big Beautiful Bill eliminates Grad PLUS loans, reduces federal borrowing caps, ends key deferment options, and revises repayment plans. These changes significantly impact graduate students’ funding strategies and could create hardship for those with significant financial needs.

What are my options since Grad PLUS loans have been eliminated?

Graduate students can now use increased Direct Unsubsidized Loans (with lower limits) or seek scholarships to help pay for school. You may want to consider private lenders like Ascent, which offer competitive graduate loan options.

What to do if my student loan deferment has been removed?

If your deferment options have been removed, you can explore income-driven repayment plans, refinancing, or alternative private loans to help manage your payments more effectively.

How has the Big Beautiful Bill changed borrowing limits for student loans?

Federal borrowing limits for graduate and Parent PLUS loans have significantly decreased. This has created funding gaps that students must fill through alternative financial strategies or private lending options.

How can Ascent assist graduate students with receiving funding?

Ascent offers graduate students flexible private loan options with competitive interest rates, but that’s not all. We also provide financial literacy resources and career support through the AscentUP program to ensure students remain financially supported.