The “Big Beautiful” Shift in Federal Student Loans: What Schools Need to Know

Federal student loan policy is about to change in ways that will reshape how students pay for college—and how schools need to support them. With sweeping revisions to borrowing limits, the elimination of certain loan programs, and a permanent tax exclusion on employer repayments, higher education leaders face both new challenges and opportunities.

We’ve pulled together everything you need to know in our 'Big Beautiful' Playbook for schools, including detailed tables and actionable strategies. Here’s a quick look at what’s inside.

What’s Changing: Loan Limits and Program Eliminations

Beginning July 1, 2026, annual and lifetime borrowing caps shift dramatically:

• Graduate students will see a $100,000 increase in lifetime borrowing for graduate study, separate from undergraduate limits.
• Professional students (e.g., medical, law) will see annual limits rise from $20,500 to $50,000 and total lifetime caps jump to $200,000.
• Grad PLUS Loans—a critical funding source for many graduate and professional students—will be eliminated entirely, leaving a significant financing gap.
• Parent PLUS Loans will be capped, reducing available funding for dependent undergraduates.

These changes will leave many students—especially in high-cost programs—without sufficient federal loan coverage.

The Funding Gap: A New Reality

The average four-year in-state cost of attendance is $108,584. Under the new limits, even with maximum Direct Unsubsidized and capped Parent PLUS borrowing, families could face gaps of $92,000 or more.

Private loans, while technically available, often come with strict credit criteria, cosigner requirements, and high interest rates—placing additional financial strain on students and their families.

Ripple Effects on Enrollment and Persistence

This shift isn’t just about numbers—it’s about student outcomes:

• Reduced Access: Limited federal and private loan options will deter students from enrolling in high-cost programs, particularly in fields like healthcare.
• Lower Retention: Those who do enroll may struggle to persist as financial gaps widen and repayment terms tighten.
• Heightened ROI Scrutiny: Families will increasingly question whether program costs align with future earnings potential.

The Opportunity for Schools

As federal funding recedes, institutions have both a mission and margin incentive to step in. Offering school-funded loans can:

• Fill the gap left by Grad PLUS and Parent PLUS reductions
• Improve access and persistence for high-need students
• Support enrollment and revenue stability
• Provide flexibility in repayment terms aligned to student success

Clasp partners with schools to design and manage these programs end-to-end—from underwriting and origination to servicing, compliance, and portfolio management—so you can focus on what matters most: helping students succeed.

What’s Inside the Full Playbook

The 'Big Beautiful' Playbook for schools dives deeper into:

• Detailed side-by-side comparisons of old vs. new federal loan limits
• Specific impacts on dependent undergrads, graduate students, and professional students
• Strategies to navigate the new earnings test and repayment plan changes
• Insights into building sustainable institutional loan programs

Bottom line: Federal student loan cuts will reshape higher education finance. Schools that act now—by developing institutional lending strategies—can turn this challenge into an advantage, ensuring students can afford to attend and graduate.