Many parents of college-bound students are about to get into the weeds of the annual Free Application for Federal Student Aid (FAFSA) process, which determines what kinds of financial aid—grants, work study, or federal student loans—the student may be eligible for.
While the application process is still largely the same, the actual amount of aid available may radically change.
Why? Because in the interests of reducing the amount of money the U.S. government allocates to federal student loan programs each year, the One Big Beautiful Bill Act (BBBA) is making some radical changes, eliminating some loan programs and imposing annual and lifetime caps on others.
Lifetime caps on student loans
Before BBBA, there were no lifetime caps on the amount of money students could borrow through federal student loan programs.
Starting in July 2026, new limits will now apply.
- The lifetime maximum borrowing limit for federal student loans students can receive as undergraduates will be $57,500.
- The lifetime borrowing limit for unsubsidized direct student loans for graduate students will be $100,000. Annual loans will be capped at $20,500.
- The lifetime borrowing limit for unsubsidized direct student loans for students pursuing professional degrees (such as law or medicine) will be $200,000, with an annual cap of $50,000.
All in all, the maximum total amount of federal student loans a student can borrow over the course of their entire college career will be $257,000.
Caps on Direct Parent PLUS loans
Direct Parent PLUS loans enable parents to borrow money to pay for college costs not covered by grants, work study and loans the student receives as part of their financial aid package.
These loans are often the option of last resort for parents, since interest rates can be significantly higher than those offered by private lenders. For example, the interest rate for Direct Parent PLUS loans issued for the 2025-2025 school year is 8.94%, plus a 4.228% origination fee.
In the past, parents could borrow the entire yearly “leftover” amount.
BBBA changes this. Starting in July 2026, Direct Parent PLUS loans will be capped at $20,000 per year, with a lifetime limit of $65,000.
Note that this limit is per student, not per household.
Elimination of Direct Grad PLUS loans
Before BBBA, Direct Grad PLUS loans allowed graduate students to borrow up to the total amount of their college costs. Starting in July 2026, this program will be eliminated for new borrowers.
Loan limits for part-time students
BBBA will reduce the total amount of a loan a student can borrow for the academic year if they’re not enrolled full-time. The Department of Education is currently developing a schedule of reductions that may or may not be ready for implementation for the 2026-2027 academic year.
The potential impact of these changes
Students and parents who had planned to borrow as much as possible from the U.S government to finance a significant portion of future college costs may need to rethink their financing strategies. They may need to turn to private loans from banks or make larger annual withdrawals from their children's 529 College Savings Plans and other savings and investment accounts than they had originally planned. A financial advisor can help you explore these and other options.
This material has been provided for general informational purposes only. Although we go to great lengths to make sure our information is accurate and useful, we recommend you consult with a qualified college financial aid consultant to fully understand how these changes may impact your situation.
This article was authored by David Jaeger and Jeffrey Briskin. David is a financial advisor with Canby Financial Advisors, a SEC-registered investment adviser. SEC registration does not constitute an endorsement by the SEC nor a statement about any skill or training. David can be reached at 508.598.1082 or djaeger@canbyfinancial.com. Jeffrey Briskin is Director of Marketing at Canby Financial Advisors.
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