The New Era of Student Borrowing
For six decades, federal loan programs helped expand access to higher education by giving students and their families a way to cover costs that exceeded available funding. But more recently, student loan borrowing has turned into unmanageable long-term debt.
Now, as a result of the Working Families Tax Cut Act (WFTCA), formerly known as the One Big Beautiful Bill, new federal borrowing limits are changing the financing landscape and raise an urgent question: how do institutions adapt without closing doors for the learners who need it most?
How We Got Here
Grad PLUS and Parent PLUS loans were created to help students and their families cover college costs that exceeded traditional federal loan limits. Unlimited borrowing through these programs contributed to ballooning debt, prompting policymakers to question the sustainability of these models. Congress responded by introducing new limits intended to encourage more responsible borrowing and reduce long-term financial risk.
The concern is understandable. As we know, student debt can delay homeownership, retirement savings, and economic mobility. But reducing access to federal financing also creates new obstacles, especially for learners who already face barriers to higher education.
Where We Are Today
As a result of the WFTCA effective July 1, 2026, unlimited Grad PLUS loans have been discontinued. Annual amounts are capped at $20,500 for most graduate programs ($100,000 lifetime cap) and $50,000 for professional degree programs ($200,000 lifetime cap). New restrictions have been placed on Parent PLUS loans, now capped at $65,000 per student with annual limits of $20,000.
The impact could be substantial. Research from Jobs for the Future, PEER Center, and Federal Reserve Bank of Philadelphia tells us:
- Prior to July 1 of this year, one in three graduate student borrowers exceeded the new borrowing limits.
- Reduced federal loan availability is projected to result in nearly $10 billion less in federal student lending.
- Approximately 40% of graduate students may not qualify for private loans due to traditional underwriting requirements such as credit score, debt-to-income ratio, and credit history.
- Approximately 95% of private undergraduate loans require a co-signer. Students without established credit histories or access to a qualified co-signer may have limited financing options.
Additionally, students who attend school less than full time may see their loan amounts prorated based on enrollment intensity, even though living expenses such as housing, food, and transportation often remain largely unchanged.
These changes create a financing gap that institutions need to address ASAP.
Where We Go From Here
With Grad PLUS loans discontinued, Parent PLUS borrowing capped and traditional private credit excluding many learners, the need for new, student-centered financing models is becoming more urgent. That urgency is reflected in the bipartisan Outcomes-Based Financing for Students Act. This legislation would help expand access to education and workforce training without forcing students into one-size-fits-all borrowing models or repayment obligations that are disconnected from their post-completion earnings.
At WGU, the Reinvesting in Nursing Education Workforce (ReNEW) Fund is one example of this approach. The fund provides last-mile support for prelicensure nursing students from low- to moderate-income households and uses an outcomes-based repayment structure: graduates repay only if they earn at least $60,000 annually.
The lesson for other institutions is not that one program can solve every financing challenge. Rather, colleges and universities should be assessing where students are most likely to encounter funding gaps and designing solutions around those realities—whether through outcomes-based financing, employer partnerships, philanthropic capital, emergency aid or other models that reduce dependence on credit scores and co-signers.
The financing landscape is changing rapidly. Institutions that act now can help ensure that higher education remains both accessible and affordable for the students who need it most.
The Big Picture
The goal of student financing should not be unlimited borrowing or restricted access—but smarter, more compassionate offerings that share risk and reward completion. By expanding these models across all learning pathways, we can ensure more individuals have access to the education and opportunities they deserve without the cost of lifelong financial strain.
What Stakeholders Should Do Now
For Students and Families
- Understand the new changes to Federal Student Aid and how they may affect your educational plans.
- Meet with financial aid advisors early to identify potential funding gaps before enrollment.
- Prioritize higher ed programs that offer alternative and/or outcomes-based funding pathways.
- If private loans become necessary, carefully review co-signer requirements, interest rates and repayment terms before borrowing.
For Colleges and Universities
- Develop proactive communication strategies to help students and their families understand the recent federal funding changes and promote responsible borrowing.
- Identify student populations most likely to experience financing gaps and prioritize solutions for low- and moderate-income learners who may be disproportionately affected by these changes.
- Partner with employers, philanthropies and mission-aligned funders to create innovative financing approaches that reduce reliance on traditional borrowing.
