New student debt limits could lead more people to be ‘priced out’ of college

The Trump administration is overhauling federal student loan programs, introducing stricter borrowing limits and eliminating key loan options starting in July. Graduate students will now face total borrowing caps of $200,000 for law and medical degrees and $100,000 for other professional programs, while parents can borrow only $20,000 annually instead of the full cost of attendance. The Plus loan program for graduate schools and several low-cost repayment plans for undergraduates have been removed, redirecting most borrowers to a new income-based Repayment Assistance Plan. These changes aim to address the $2.3 trillion U.S. student debt crisis, with nearly 8 million borrowers already in default. However, analysts project a $6.85 billion funding shortfall for this academic year, leaving students and universities scrambling to cover tuition costs. Boston-based startup Clasp reports that the shift may force some prospective students—particularly those from low-income backgrounds or pursuing lower-paying degrees—to skip college entirely, reversing decades of federal policy designed to ensure access regardless of financial circumstances. The White House argues the new limits will pressure schools to lower tuition and create ‘durable policies’ for all education levels, from vocational training to PhDs. Education Undersecretary Nicholas Kent claims the measures will ultimately reduce college costs across the board. Critics, including Persis Yu of Protect Borrowers, warn that without tuition reductions, many families will turn to private lenders, which often charge higher interest rates and require cosigners—especially for graduate students with limited credit history. Private loan eligibility remains a hurdle: over one-third of graduate students may struggle to secure financing without a cosigner, according to the Federal Reserve Bank of Philadelphia. Meanwhile, tuition costs have surged roughly 80% over the past 25 years, with no signs of schools lowering prices. Two-thirds of students already borrow money for college, and the new limits could exacerbate financial barriers for those least able to afford them. The policy shift marks a dramatic departure from the early 2000s, when expanded federal loan options and institutional scholarships made higher education more accessible. Now, with borrowing constraints tightening, experts fear a two-tiered system may emerge, where wealthier students pay full tuition while others are priced out entirely.