When the One Big Beautiful Bill Act (OBBA) was signed into law on July 4, 2025, it was immediately regarded as a turning point in the financial structure of U.S. higher education. Many of the bill’s changes will directly impact how students can afford higher education. The bill’s Title IV amendments scale back loan programs and increase accountability measures for colleges and universities. Undergraduate students retain their Pell Grants and subsidized loans while graduate students and parents face strict new caps. Additionally, repayment plans have been overhauled. In short, more of the cost burden shifts onto the students, families and even colleges themselves, sparking unease among families and graduate students.

PLUS Loan Woes

Perhaps the most dramatic change is the end of the Graduate PLUS loan, an unsubsidized loan offering for graduate students. As of July 1, 2026, the federal government will no longer issue federal PLUS loans to new graduate borrowers, an option that has historically allowed graduate and professional students to cover the full cost of attendance. Instead, new graduate students may only borrow unsubsidized loans — up to $20,500 per year, with a lifetime maximum of $100,000. Current borrowing students are grandfathered in, meaning that they can continue borrowing and take out loans. Many of these programs cost upwards of $50,000 a year, and while the limits do not account for undergraduate debt, they still serve as a pressure point for students.

Parent PLUS loans were also revamped by the bill, drastically limiting their scope. New parent borrowers are limited to no more than $20,000 per year per child and $65,000 in total per dependent child. Previously, they were able to borrow up to the cost of attendance each year, but current borrowers are still able to borrow as needed.  In effect, federal aid no longer fully finances expensive programs for new students, pushing them toward private loan alternatives, which have proved controversial to some. Reporter reached out to RIT’s Office of Financial Aid and Scholarships for a comment, but they declined in an effort to make sure their information was as accurate as possible.

By contrast, core programs such as direct subsidized and unsubsidized loans, as well as Pell Grants, were mostly unaffected by OBBA, while Parent PLUS loans survive in a narrower, more restrictive form due to the borrowing limits. Additionally, colleges can now prorate, or adjust, the federal loan amount students are eligible to borrow, provided that they are attending part-time or taking a reduced course load. This lowers borrowing and debt risk for students who aren’t progressing full-time, but may also result in others lacking sufficient loan aid to cover living expenses.

Repayment Changes

For students who do borrow, repayment rules are changing, too. The bill scraps the existing income-driven repayment plans and replaces them with a new Repayment Assistance Plan. Under the new formula, payments scale to a borrower’s adjusted gross income, capped at a specific percentage of discretionary income set by federal guidelines. The result: some borrowers see lower payments, while others shoulder more over time, with balances erased after 30 years. This comes with the caveat that long-standing safety nets of forbearance and deferment have been reworked: borrowers can still pause payments, but interest may continue to accrue, and eligibility windows are narrower than before. Deferments due to hardship also disappear, and forbearance is capped at nine months every two years. While the system is simpler than before, it is arguably more punitive.

OBBA marks a pivotal moment in higher education finance, preserving federal support for undergraduates from low-income backgrounds, while driving parents and graduate students towards the private loan market. Repayment is more predictable, yet less forgiving and colleges are being asked to shoulder more responsibility for student outcomes.

Whether OBBA creates a fairer, more affordable system, or simply shifts burdens from one group to another, will become clear only as students and families navigate the new rules in the years ahead. For now, one thing is certain: the era of open-ended federal borrowing is over.