New Rules for Student Loans Start July 1, 2026: What Borrowers Need to Know

New Rules for Student Loans: Federal student loans are changing in a big way on July 1, 2026. The University of Iowa says the Graduate PLUS loan will stop for new graduate and professional borrowers on that date. At the same time, new rules will also set fresh limits for Direct Unsubsidized Loans and Parent PLUS loans. The U.S. Department of Education says these changes come from the One Big Beautiful Bill Act, which was signed into law on July 4, 2025.

If a student starts a graduate or professional program in the 2026–27 school year and has not received a federal Direct Loan disbursement before July 1, 2026, then Graduate PLUS will not be available. That student will have to use the new Direct Unsubsidized Loan limits instead. The University of Iowa also notes that some loan proration rules for students who are not full-time are still being worked out by the federal government.

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Who can still use old Graduate PLUS rules?

Not every student loses Graduate PLUS right away. Some returning students may still get help under a legacy provision. To qualify, a student must have received a federal Direct Loan disbursement before July 1, 2026, and must stay in the same credentialed program at the same school. If those conditions are met, the student may keep borrowing Graduate PLUS for up to three more academic years, or for the rest of the time left in the program, whichever is shorter.

This protection does not cover everyone. Students who change programs, move to another school, withdraw and later return in a different program, or move from undergraduate study into graduate or professional study in 2026–27 do not get the legacy protection. The Department of Education says the final implementation rules are still being finished, so some details may still be refined, but the core date and rule changes are already set.

New Student Loan Caps

For Graduate

The new borrowing caps are much tighter than the old rules. For graduate students in master’s and Ph.D. programs, the annual Direct Unsubsidized Loan limit will be $20,500, with an aggregate cap of $100,000. For professional students in programs like medicine, dentistry, law, pharmacy, and other defined professional degrees, the annual limit will be $50,000 and the aggregate limit will be $200,000.

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Undergraduate Borrowing

The University of Iowa also says these limits do not include undergraduate borrowing, and students who move between graduate and professional study may borrow a combined maximum of $200,000 for that level of study.

Parent Borrowing

Parent borrowing is changing too. New Parent PLUS borrowers will face an annual limit of $20,000 per dependent student and an aggregate limit of $65,000 per dependent student starting July 1, 2026. The University of Iowa says that in many cases this will not cover the full cost of attendance, so families may need to spread out borrowing more carefully.

Some families can keep the older borrowing rules if the parent or student received a loan before July 1, 2026. Parents must still complete the FAFSA, submit a Parent PLUS Loan request, and sign the Parent PLUS Master Promissory Note when required.

Students and parents should note that loan options available before July 1, 2026, may change afterward. The University of Iowa advises families to plan ahead, borrow only what they need, and contact the financial aid office before reaching the new borrowing limits.