Trump’s new student-loan overhaul limits how much grad students can borrow from the federal government and replaces generous income-driven plans, and private lenders are enthusiastic because it’s likely to push more borrowers into their products and refinancing.
What changed in Trump’s overhaul
-
The Grad PLUS program is being eliminated, so grad students can no longer borrow up to the full cost of attendance from the federal government.
-
New federal annual caps now apply: about $20,500 for most graduate students and $50,000 for certain professional programs like law and medical school.
-
The SAVE income-driven repayment plan is being shut down as part of a settlement and broader legislative changes, and remaining income-driven plans (except IBR) are being phased out by 2028 under Trump’s One Big Beautiful Bill Act (OBBBA).
-
A new Repayment Assistance Plan (RAP) will replace multiple IDR plans, tying payments to total income, requiring some payment even at low incomes, and stretching repayment up to about 30 years, which lowers federal subsidy costs and increases total payments.
Why private lenders are “excited”
-
Sallie Mae’s CEO called the reforms an “opportunity” and estimated they could bring about $5 billion in additional private loan originations each year because federal grad lending is capped.
-
Navient’s CEO described the end of Grad PLUS as a “substantial and significant expansion of opportunities” to lend to graduate students, saying there is “a lot of room for growth.”
-
SoFi’s CEO has similarly said the changes could expand in-school private lending and student-loan refinancing as federal terms become less generous and closer to private-market structures.
What this could mean for borrowers
-
With federal Grad PLUS gone and caps in place, students who need to borrow above the new limits for expensive grad or professional programs will have to either cut costs, skip programs, or turn to private loans.
-
Borrowers who move to private loans give up federal protections such as income-driven repayment, broad-based forgiveness options, and certain forbearance and hardship flexibilities.
-
Critics warn that private loans often have higher interest rates, stricter underwriting (cosigners, good credit), and fewer safety nets, which could make debt more burdensomeand limit access to graduate education, especially for lower-income students.
