The U.S. Department of Education has issued a Notice of Proposed Rulemaking (NPRM) outlining major changes to the federal student loan system under President Donald Trump’s Working Families Tax Cuts Act. The proposal seeks to lower higher education costs, simplify repayment options, and introduce borrowing limits for graduate and professional students.
The proposed rule will remain open for public comment for 30 days, with submissions due by March 2, 2026. Following a review of feedback, the Department will move to finalise the regulations. This NPRM is the first of three planned rules aimed at implementing amendments to the Higher Education Act.
Grad PLUS to be eliminated, new loan limits proposed
Among the most significant measures is the elimination of the Grad PLUS loan programme, which currently allows graduate students to borrow up to the full cost of attendance. Lawmakers have argued that unlimited access to loans has contributed to rising graduate tuition fees.
Under the proposal, beginning July 2026, new graduate students would be capped at $20,500 per year in federal loans, with a lifetime borrowing limit of $100,000. Professional students would be eligible for up to $50,000 per year, subject to an aggregate cap of $200,000.
The Department noted that graduate borrowing now accounts for a substantial share of federal student loan balances, particularly within income-driven repayment plans. Officials said the new caps are intended to limit excessive borrowing, curb tuition inflation, and safeguard both borrowers and taxpayers.
Colleges and universities would also be allowed to impose programme-level loan limits below the federal maximums, enabling institutions to better align borrowing with programme costs and expected post-graduation earnings.
Repayment options streamlined
The proposal also consolidates existing repayment choices into two primary plans. These include a tiered standard repayment plan with fixed terms of 10, 15, 20, or 25 years based on loan balance, and a single income-driven option known as the Repayment Assistance Plan.
Under the income-driven plan, monthly payments would be tied to a borrower’s ability to pay. The Department said borrowers who make on-time payments would be shielded from interest accumulation that increases their overall loan balance. Officials said the changes aim to reduce complexity and provide a clearer repayment framework.
Expanded loan rehabilitation
The proposed rule would allow borrowers to rehabilitate a defaulted loan twice, instead of the current one-time limit. According to the Department, this measure would help more borrowers return to good standing and resume repayment.
Public comment and rulemaking process
Public comments must be submitted through Regulations.gov, as fax or email submissions will not be accepted.
The regulations were developed through the Reimagining and Improving Student Education (RISE) negotiated rulemaking committee, which included representatives from higher education institutions, legal aid organisations, business groups, students, and taxpayer advocates. The committee reached consensus on the proposal in November 2025.
Under federal law, the Department was required to publish the NPRM using the agreed-upon language following that consensus. The Department said this rule marks the first of three regulatory actions planned to implement changes introduced by the Act.
