The U.S. Department of Education finalized a sweeping set of regulations today aimed at lowering the cost of college and streamlining how Americans pay back their student loans.
The new rules serve as the primary framework for implementing the higher education reforms found in the Working Families Tax Cuts Act, signed into law by President Trump last summer.
Starting this July, the federal government will impose new limits on student and parent borrowing, replace the current variety of repayment plans with a simplified system, and launch a new income-driven repayment option.
The move comes as federal student debt sits at $1.7 trillion, a figure the Department notes is fueled by tuition costs that have outpaced almost every other household expense over the last four decades.
A centerpiece of the plan is the total elimination of the Grad PLUS program, which previously allowed for nearly unlimited borrowing for advanced degrees. Department officials argue that uncapped loans encouraged universities to hike tuition prices.
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To replace it, the rule establishes fixed annual and aggregate loan limits for graduate and professional students. Additionally, colleges will now have the authority to set their own programmatic loan caps to ensure students do not borrow more than their expected future earnings can support.
“The Trump Administration is focused on putting students and taxpayers first, which is why we are implementing durable policies to make higher education more affordable,” said Under Secretary of Education Nicholas Kent. “This final rule will help ensure students can access higher education without racking up excessive loan debt, offer repayment options that better serve borrowers, and force institutions to reduce costs.”
The Department’s data indicates that 40 percent of master’s degree programs currently provide a negative return on investment. Furthermore, 71 percent of graduates with debt report delaying life milestones like buying a home.
By curbing overborrowing and ending what the Department calls “illegal loan forgiveness schemes,” officials estimate the rule will save taxpayers $409 billion and reduce overall student loan debt by $224 billion.
Repayment is also getting a makeover. The Department is introducing a “Tiered Standard” plan and a new “Repayment Assistance Plan.” The latter is designed to eliminate negative amortization, a situation where a borrower’s balance grows even while they are making payments because the interest exceeds the payment amount.
These changes follow months of negotiations. The Reimagining and Improving Student Education (RISE) Committee, which included representatives from colleges, student groups, and taxpayer advocates, met throughout the fall of 2025 to hash out the details. After a public comment period that drew over 80,000 responses, the Department finalized the timeline for implementation.
Most of the new rules will take effect on July 1, 2026. Specific changes regarding loan rehabilitation and deferment will follow in 2027, with the final phase-out of older repayment plans scheduled for July 2028. The full text of the rule is scheduled for official publication in the Federal Register on May 1.
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