New federal loan caps push graduate students to private lenders

Chloe Frabotta started her physician assistant program in New York City this fall with less certainty than she had expected. Weeks before classes began, it was unclear if her program qualified for higher federal loan limits. She borrowed $6,000 from the federal government for the first trimester. She covered the rest with private loans, using her mother as a cosigner.

The federal government implemented new caps on student loans this fall as part of President Donald Trump’s “Big Beautiful Bill.” These rules limit professional degree programs to $200,000 in total federal borrowing. Other graduate programs are capped at $100,000. Previously, graduate students could borrow up to the full cost of their degree. The bill also sets a lifetime borrowing cap of $257,500 for new borrowers and limits how much parents can borrow for their children’s education.

Private lenders are seeing a sharp increase in business. SoFi reported that student loan originations reached $2.9 billion in the third quarter. That figure is nearly double the amount from a year earlier. Sallie Mae, which holds more than half of the private student loan market, reported that graduate loan volume rose 119% year-over-year in late October.

Jordan Matsudaira, director of the Postsecondary Education & Economics Research Center at American University, estimates that more than 500,000 borrowers will need to find an extra $20,000 per year outside the federal system. His analysis shows that students in expensive fields like medicine, law, and dentistry, as well as those in high cost-of-living states, face the greatest financial pressure.

The Trump administration argues these limits will curb excessive borrowing and force schools to control costs. At least 40 schools have cut prices for some programs since the caps took effect, according to the American Enterprise Institute. Critics, however, note that most colleges cannot lower tuition without hurting their budgets. They worry the changes will burden students from poor families.

Colleges are responding by creating new financial aid options. The University of Kansas School of Law began issuing its own private loans this year. It has approved eight loans so far. Steven Freedman, associate dean of admissions at that institution, said the new lending options are necessary to maintain access for all students. He noted that private banks now have a stronger role in deciding who can afford law school.

Lewis & Clark College in Portland, Oregon, saw an increase in private loan usage. Its graduate school of education and counseling launched a new scholarship this fall to help students affected by the caps. Anastacia Dillon, associate vice president for financial aid there, described the changes as really disruptive. At the University of Mount Saint Vincent in the Bronx, more first-year students are relying on private debt even as the school increased aid for those in need.

A legal dispute over which programs count as professional degrees delayed software updates for loan processing. A federal judge blocked part of the rule, allowing students in fields like nursing and physical therapy to access higher limits. This delay caused schools to postpone sending financial aid packages. Jon Witter, CEO of Sallie Mae, said the peak lending season extended into October because of these delays.