Feds Cap Grad School Loans, Kill PLUS Loans: New Limits Hit July 2025

The Graduate Opportunity and Affordable Loans Act is shaking up how grad students pay for school. Basically, the government is putting a tighter lid on how much money graduate and professional students can borrow through federal loans, and they're completely ditching a popular loan program. Here is what you need to know.

Capping the Cash: New Loan Limits

Starting July 1, 2025, the amount you can borrow each year in Federal Direct Unsubsidized Stafford Loans is getting capped. If you're in a standard grad program (master's or PhD), you're looking at a max of $20,500 a year. If you're in a professional program (think law, medicine, etc.), the limit is $40,500. There are also total borrowing limits: $65,000 for grad students (on top of any undergrad loans) and $130,000 for professional students (again, on top of undergrad loans). (See: SEC. 2. Loan reforms)

• Real-World Impact: Imagine a future social worker pursuing their MSW. With tuition often exceeding $20,500 per year, they'll now have to find other ways to cover the gap – savings, private loans, or maybe even reconsidering their program choice. Or, a law student at many private universities, that might need to find additional funding sources to cover the difference between the cost of tuition and the new $40,500 cap.

The End of PLUS Loans

Here's the big one: Starting July 1, 2025, Federal Direct PLUS Loans for graduate students are gone. (See: SEC. 2. Loan reforms). These loans have been a go-to for many students to cover costs beyond the Stafford Loan limits. Now, that safety net is disappearing. The Act requires schools to notify all current and prospective grad/professional students about this change by June 30, 2025. (See: SEC. 2. Loan reforms).

• Real-World Impact: This could be a major roadblock for students who rely on PLUS loans to bridge the gap between Stafford Loans and the full cost of their education. Without PLUS loans, many might have to turn to private loans, which often come with higher interest rates and less flexible repayment options.

School's Call: Setting Lower Limits

The law also gives schools the power to set their own, even lower loan limits for students starting programs on or after July 1, 2025, as long as they apply those limits consistently across the board. (See: SEC. 2. Loan reforms). This means your school could decide you can only borrow, say, $15,000 a year, even if the federal limit is higher.

• Real-World Impact: This gives schools more control over student borrowing, which could help prevent students from taking on excessive debt. But, it could also make it harder for students with limited personal resources to attend certain programs or schools.

The Big Picture

This law is a mixed bag. On the one hand, it could help prevent grads from drowning in debt. On the other, it could seriously limit access to graduate education, especially for those who don't come from wealthy backgrounds. The phase-out provision offers a small buffer for students who received a loan disbursement between June 30, 2024, and July 1, 2025, allowing them to continue under the old limits for the 2025-2026 award year if they haven't graduated. But after that, the new rules are in full effect. The big question is whether this will push students toward more affordable programs or simply push them out of graduate education altogether.