New federal loan limits reshape how families borrow for college

Undergraduate families who rely on federal loans to help cover college costs face new limits on how much they can borrow, starting July 1. The changes come from new federal legislation passed by Congress that places caps on Parent PLUS loans and other direct federal student borrowing programs. 

Key changes to federal loans

In one of the biggest changes, borrowing limits for parents will change. Previously, the Parent PLUS loan allowed borrowers to borrow up to their dependent’s total cost of attendance. Beginning July 1, parents are limited to $20,000 per student per year and $65,000 total over a student’s lifetime. 

Existing borrowers may continue to borrow under current rules through a legacy provision in the law. Those parents can take out loans up to their dependent’s full cost of attendance for up to three academic years, as long as the student remains enrolled in the same program. 

The legislation leaves undergraduate direct loans unchanged. However, these loans now count toward a new $257,000 lifetime federal borrowing limit, which also includes borrowing for graduate education. 

Graduate students will be limited to $20,500 annually and $100,000 total in unsubsidized federal loans, with higher limits for professional degree programs. The legislation also eliminates Grad PLUS loans after July 1, which previously allowed students to borrow up to the full cost of attendance. 

Additionally, all borrowers who take out new loans after July 1 will use a new repayment plan, the Repayment Assistance Program, or RAP, which replaces existing income-driven repayment plans.  

“These changes will affect how families approach borrowing for college,” said Deborah Agee, executive director of UC Davis Financial Aid and Scholarships. “Our team stands ready to help both students and parents understand their options as they plan ahead.”