Congress continues to navigate the intricacies of President Trump’s hefty budget proposal, often referred to as the “Big and beautiful” bill. One point seems apparent: the decisions made will significantly affect student loans.
Both the House and Senate versions are still under discussion. The Senate’s proposal suggests alterations to the federal student loan system, claiming it could save taxpayers around $300 billion.
A central aspect of both versions includes a cap on the borrowing limits for federal educational loans.
Many argue that placing limitations on loans—especially for graduate school and parental borrowing—has been overdue.
Preston Cooper, a senior fellow at the American Enterprise Institute, noted in a recent op-ed that allowing unlimited loans has historically led universities to increase tuition fees.
However, advocacy groups caution that the proposed changes could pose challenges for low-income students, steering more borrowers toward private lenders, which typically offer less favorable terms.
Organizations like the American Medical Association have voiced worries that these borrowing caps might prevent eligible medical students from accessing necessary funding, potentially worsening the physician shortage.
Here’s what to know about the proposed borrowing limits for federal student loans:
What are the borrowing restrictions for parents?
The House and Senate bills differ, but both aim to limit how much parents can borrow under the Parent Plus Loan program. The House plan proposes a $50,000 cap for undergraduate parents, while the Senate plan suggests a limit of $65,000 per student.
Currently, there are no borrowing restrictions, allowing parents to cover the full cost of attendance.
Parents borrowing are often left with less favorable loan terms, significantly impacting their financial security while trying to support their children’s education. In 2022, over 3.7 million families together borrowed more than $100 billion through this federal program.
After graduation, those who utilized these loans find themselves with an average debt burden of around $29,600—a figure that remains substantial a decade later.
What are the loan limitations for graduate students?
The proposed law sets a $100,000 borrowing limit for most master’s programs, while professional degrees such as law or medical school could have caps of $150,000 for the House plan or $200,000 for the Senate’s.
Currently, graduate students can borrow up to the full attendance cost. Cooper described the proposed limits as a “good start,” suggesting they could curb less scrupulous lending practices.
Still, these caps raise concerns. Experts warn that the adjustments could aggravate the existing physician labor shortage, especially in underserved areas and high-demand specialties.
According to the American Medical Colleges Association, the median cost for four years at medical school for the upcoming class is substantially above the proposed limits, at $286,454 for public institutions and $390,848 for private ones.
What about private student loans?
Nearly 43 million borrowers hold about $1.7 trillion in federal student debt—over 92% of all student loan debt, meaning private loans account for a smaller portion, around 8%. However, these private loans often carry higher costs and fewer protections.
There is a general worry that borrowers closing out federal loans might have to shift to private lenders, many of which have a troubled history with exploiting borrowers.
Although private loans constitute only a fraction of the total debt, they account for a significant portion of complaints filed against lenders.
Senate Republicans defend the proposed changes, arguing that limits on student loans are necessary to address the issues within the current education system. Senator Bill Cassidy highlighted the failures of higher education in preparing students for the job market, leading many to graduate with burdensome debt.
As Trump presses Congress for timely progress on the proposed budget by July 4th, the discussions continue on how best to address these pressing issues.
