The One Big Beautiful Bill Act Explained 2026 Changes for Grad Student Loans

Education is so important because knowledge once given can never be rescinded, you know, so it's yours to keep. So don't let this be the thing that holds you back from that. I'm Liz Thomas, head of investment strategy at SoFi. If you're confused about how to pay for grad school, you are not alone. It is complex, it is high stakes, and it can be emotional. New legislation passed has only made things more complicated. We get lots of questions about this topic from people who bank, invest, and borrow with us. I'm joined today by Tiffany Aliche, the budgetnista, and we're going to dig into how the Big Beautiful Bill Act is changing things like grad plus loans, parent plus loans, borrowing limits, and maybe even shifting the way that students have to borrow for college going forward. Thank you, Tiffany, for coming on with us today. I know this topic is very important to you too. Tell us a little bit about why that is. Well, first of all, thank you for having me. And I am a product of student loans. I had student loans for my undergraduate degree. I took out student loans for my master's degree. My parents took out parent plus loans for my four sisters and I. And so I've got nieces, I've got nephews. Honestly, loans are a critical component of how I got to be here as the budgetnista. And so I have this invested interest in the changes that are happening. Okay, let's start with the big picture. Give us a sense for where things stand with student lending today. Honestly, Liz, it's such a big system. We're talking about $1.7 trillion in federal student loan debt across more than 40 million borrowers. That's an average balance of about $40,000. Numbers so big that it might be kind of hard to wrap your mind around, but they represent real people who are investing in their education, in their careers, and in their futures. So how will the Big Beautiful Bill change the way that they do that? Well, this legislation reshapes how borrowing and repayment work at a fundamental level, especially for grad students who may need to turn to private student loans due to the new federal borrowing limits. So this is the perfect moment, if I'm being honest, to reconsider your approach. And for folks coming into this stage of life is to consider how they're going to support their educational goals and, honestly, their long-term financial health. Okay, let's get into some of the big changes coming in 2026. Where do we even start? Okay, a big change is that grad plus loans are going away. They won't be available to new borrowers for the academic year starting July 1st, 2026. That marks really a major shift in how grad students are going to pay for school. Walk us through what that means for students. So grad plus loans have been huge for students going to graduate school for degrees. We're talking about master's programs, degrees if you want to be a doctor or a lawyer. Before, these loans had no annual or lifetime limit. You could borrow to cover everything. You can borrow to cover tuition, housing, living expenses. That made all these degrees way more accessible, but also it meant that you can take on a lot of debt. And so it's not been unusual for a law student or a medical student to leave school with $200,000 or more in federal loans. Okay, so starting in 2026, grad students, professional students won't have access to this unlimited borrowing. What are their other options? So another big change is the government has set new borrowing limits. So here's the deal list. The new cap is around $20,000 a year for most grad students, up to $100,000 total. But it's $50,000 a year for professional students, up to $200,000 total. And there's a new lifetime cap just under $260,000 for all federal student loans, no matter what. And does the lifetime cap only apply to grad students? That cap applies to all federal student loans. So it includes whatever you borrowed for undergrad and graduate school. And again, all of this applies to new students starting a program after July 1st, 2026. Okay, tell me more about those professional students. You mentioned medical degrees, law degrees, and the higher limits there. Yeah, the Department of Education says that if you're going to school for a medical, dental, or law degree, you're eligible for the $200,000 limit, right? And if you're not really sure if that applies to you, you can check on the DOE website, but otherwise, grad students will be capped at $100,000 total. Okay, got it. Quite honestly, a good percentage of students are already, and we're talking about like a quarter to a third, are already borrowing at higher levels than these new limits. So these new limits really are going to be quite the culture shock for the new students and how they borrow from the federal government. There's also going to be a shift for situations where parents are looking to help out too, because there are some changes to Parent PLUS loans. Okay, tell us more about that. So a Parent PLUS loan is a federal loan that lets a parent of an undergrad help pay for school. So, for example, my parents did this for me and my sisters, right? The parent takes out loans in their name. Now, these loans will also have new limits now. So let's talk about what some of those limits are. There is a $20,000 a year limit and a $65,000 lifetime total per student limit. And how does that stack up with what tuition costs are today? Well, the average annual tuition today is about $10,000 per year for in-state public schools, $25,000 for out-of-state schools, and around $45,000 for private institutions. And that's before housing and any other costs. Yeah, okay. So the limits have come down on Parent PLUS loans. They probably can't cover everything anymore, which is why we might start seeing a shift towards private lending. Exactly. So Liz, another big change we're going to see is that more parents are going to have to co-sign for loans. So when you take out private loans, your credit history is going to play a bigger role. That's not so with federal student loans. So that's a big change. And if we're being honest, a lot of grad students and especially undergrad students, they don't have established credit records. So we're expecting to see more parents being asked to co-sign these loans. That can help you get a better rate, but it can also put the parent's credit on the line. Right. Okay. So starting a conversation in families as soon as possible is really important. We have to talk about who's borrowing what, who's co-signing, and then how everything's going to get paid back down the road. Exactly. All of this is going to make advanced If you approach these decisions proactively as in now, you know, you're going to be in a way stronger position to make borrowing work for you and your family. Let's talk about what people can do right now to get ahead of some of these changes that are coming from the big beautiful bill. So Liz, the first step is to do your research. The sooner you understand the real cost of a degree, the more options you have to manage it. That means fully exploring all of the different ways of finance and education. So that includes grants, scholarships, federal loans, and private loans. Well, and that's key because most people underestimate how much college really costs. And in fact, we did a survey this year, 25% of respondents had no idea how much a four-year degree cost. And when they guessed, they underestimated it by about 30 to 60%. That's why understanding the cost is key and exploring all the options. So that can mean considering a state school, which can be less expensive, especially if you're an in-state student. And also living at home. I did it, wasn't so fun, but I did save a lot of money. It's really important to consider how much do I really need to borrow? What do I expect my income to look like after graduation? What can I realistically afford to repay? And what's the plan if something changes financially? Right. And I just want to be clear, we're not trying to discourage people from getting a degree. It's still very, very important. We just want to make sure that you're planning financially for what's ahead. Absolutely. You have to have a clear repayment plan before you borrow. You need to come to terms with your monthly payment, your timeline, your backup options. Knowing all that in advance will help give you way more confidence and control. So to recap, the big beautiful bill is reshaping how you borrow for higher education, new borrowing limits, and a shift toward private loans. Exactly. The better you understand your options and the earlier you plan, the more confident you'll feel about the choices that you make. So Liz, my dad would say this to my sisters and I after he graduated from undergrad or a graduate degree. He would always have this speech where he'd say, education is so important because knowledge once given can never be rescinded. He knows what's yours to keep, so don't let this be the thing that holds you back from that. Well said, dad. And thank you, Tiffany, for coming on with us today. For more resources on paying for college and managing student debt, follow SoFi. Check out the show notes for links to tools, calculators, and guides to help you make more informed decisions.