- The final rule limits annual graduate borrowing to $20,500 and professional-student borrowing to $50,000, while also capping first-time Parent PLUS loans at $20,000 per year and $65,000 per dependent.
- Two new repayment schemes (Tiered Standard Scheme and Repayment Assistance Scheme) starting from July 1, 2026 replace the existing system for new borrowers.
- The Department closed some loopholes in the final rollout of RAP that would have allowed cheaper RAP payments for lower IBR loan forgiveness.
United States Department of Education published its final rule Enacts the student loan provisions of the Working Families Tax Cut Act, eliminates Grad PLUS for new borrowers, limits first-time Parent PLUS, narrows the definition of “professional student”, and consolidates the federal repayment system into two plans for new borrowers.
Most provisions will take effect July 1, 2026, rehabilitation and forbearance changes will take place July 1, 2027, and legacy income-contingent plans will phase out entirely on July 1, 2028.
647 page rule (PDF file) follows a negotiated rulemaking process that began in late 2025 and drew more than 80,000 public comments. The department says the package would save taxpayers $409 billion and reduce student debt by $224 billion by preventing more borrowing.
The new borrowing limits will be effective from July 1, 2026
Federal student loan borrowing will for the first time be governed by annual and lifetime limits on every type of loan.
Undergraduate students can borrow up to $20,500 per year, with a total limit of $100,000. Students enrolled in qualifying business programs can borrow up to $50,000 per year, for a total limit of $200,000.
Parent PLUS borrowers face a new $20,000 annual limit and a lifetime limit of $65,000 per dependent.
Most borrowers who take out loans on or after July 1, 2026 are subject to the lifetime aggregate limit of $257,500 on all federal student loans. The Parent PLUS Loan is excluded from that lifetime number. Grad Plus loans count toward this.
The Grad Plus program itself is closed to new borrowers. An interim exception preserves access for students enrolled in a program before July 1, 2026, who have already received loans for that program. Those borrowers may keep the prior limit for the lesser of three years or the time required for the credential, provided they remain continuously enrolled. The exception lapses upon withdrawal or termination of nomination.
Institutions also get new powers to set lower loan limits. Schools may set loan limits below the federal limit, as long as those limits apply consistently to every student in the program. The Department also requires schools to implement a schedule of reductions for students enrolled less than full-time.
professional vs graduate student
The higher $50,000 annual limit applies only to programs that meet the rule’s strict professional-student definition. Eleven main fields qualify automatically:
- Law (LLB or JD)
- Medicine (MD or DO)
- Pharmacy (PharmD)
- Dentistry (DDS or DMD)
- Veterinary Medicine (DVM)
- Optometry (OD)
- Podiatric Medicine (D.P.M., D.P., or Pod.D.)
- Clinical Psychology (Psy.D.)
- Chiropractic (DC or DCM)
- Theology or Divinity (MDIV or MHL)
Other programs must meet a four-part test:
- Fulfilling academic requirements to begin practice and skills beyond the bachelor’s degree
- Doctoral level coursework typically spans at least six academic years (with at least two post-graduate degrees).
- A general occupational license requirement
- Placement within a similar four-digit classification of the intermediate group of instructional programs as one of the eleven core areas.
The Department spent significant space in the final rule rejecting comments asking to include physical therapy, occupational therapy, physician assistant, social work, nursing (including MSN, DNP, and nurse practitioner programs), marriage and family therapy, counseling, and art therapy.
Those programs fall under the graduate level range. The Department clarified that the exclusion is for loan-limit administration only and does not reflect a judgment about the rigor or professional standing of the program.
However, there is already a new bill in Congress to expand this definition.
New Repayment Plans: RAP and Tier Standard
For loans granted on or after July 1, 2026, borrowers will have to choose one of the two schemes. Tiered Standard plan offers fixed monthly payments over 10, 15, 20 or 25 years, depending on the balance. The minimum monthly payment is $50.
Repayment Assistance Scheme is the new income-driven option. Payments range from 1% to 10% of adjusted gross income on a sliding scale, with a $10 monthly minimum. Married borrowers’ payments are prorated based on loan balance rather than calculated against combined income, thereby addressing a long-standing complaint about the IDR penalizing two-earner families.
RAP also includes two benefits which were not available under the earlier schemes. Unpaid interest is forgiven in any month the borrower’s timely payments do not fully cover the interest earned, eliminating negative amortization. The Department also reduces the additional principal amount by up to $50 with each on-time payment.
RAP360 offers forgiveness after 30 qualifying monthly payments (30 years) and qualifies for Public Service Loan Forgiveness.
Closing the Loophole: RAP-to-IBR Strategy
While you are able to enroll in RAP, and then switch to IBR later when eligible, it is important to note that the Department has clarified that payments made under RAP do not count for IBR/ICR/pay waiver.
One plan idea circulating in financial aid circles assumed that borrowers could enroll in RAP for lower monthly payments, then later switch to IBR to capture IBR’s shorter 20- or 25-year loan forgiveness clock. The final rule closes that down.
The Department amended 34 CFR § 685.209(k)(4)(i)(A) to state: “Notwithstanding paragraph (k)(4)(i)(B) of this section, making payments under an IDR plan, other than a repayment assistance plan, or having a monthly payment obligation of $0.” In its discussion, the Department stated that “Congress intentionally intended to exclude payments made under the Repayment Assistance Plan from being included in IBR forgiveness.”
Translation: A borrower can switch back to IBR from RAP, but RAP months do not count toward the IBR forgiveness clock. However, time in IBR, ICR, or PAYE does count toward the RAP forgiveness clock.
What this means for Americans with student loans
Families who factor in the cost of graduate school will see real impacts immediately. A two-year MBA, MSW, or master’s program would effectively have only $41,000 to borrow federally ($20,500 per year for a two-year program). This will likely drive more borrowers toward private student loans.
Doctoral students in clinical psychology, dentistry, or medicine retain access to the higher $50,000-a-year track, but anyone outside the eleven core areas must verify that their program qualifies under the four-part test before enrolling.
Original borrowers face the biggest changes. Many families who relied on Parent Plus to cover the full cost of attendance gap will need to plan more carefully, pay more attention to need- and merit-based aid, or choose less expensive schools.
For existing borrowers, the practical question is whether to switch from the legacy IDR scheme to RAP. Some low-income borrowers with large balances will see meaningfully lower monthly payments under RAP, especially given the principal-matching feature and full unpaid-interest waiver. Borrowers with higher earnings at the end of the current 20- or 25-year IBR term generally should not switch.
See our full RAP vs IBR comparison for details.
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