Following the passage of the One Big Beautiful Bill Act (the Act) on July 4, 2025, the Reimagining and Improving Student Education (RISE) committee was established by Congress to set new regulations to comply with the Act, which are set to become effective July 1, 2026. Specifically, the Act imposes stricter borrowing limits on graduate students and mandates the discontinuation of the Grad PLUS loan program.
The Act establishes new annual and aggregate lifetime limits for Direct Unsubsidized Loans, distinguishing between “Graduate” and “Professional” students. Graduate students will have an annual limit of $20,500 and an aggregate cap of $100,000. Professional students such as medical, dental, law, and pharmacy, will have an annual limit of $50,000 and $200,000 in aggregate. The total value of loans, both undergraduate and graduate, issued to a student over their lifetime will be capped at $257,000.
On April 20, the U.S. Education Department (ED) confirmed a change to the new RISE regulations. Effective July 1, Grad PLUS loans will count toward the new $257,500 student lifetime borrowing limit — a reversal from the ED’s earlier interpretation of the Act. The original RISE regulation held that Grad PLUS loans would not be included in the lifetime limit. This change is particularly important for students returning to school, dual-degree or extended program students, or any student already carrying large Grad PLUS debt.
This regulatory reversal clarified the position of the ED that was communicated in an April 17 webinar at which the agency gave conflicting answers to the question. The net effect of the change is that Grad PLUS loans borrowed before July 1 will be counted against the new lifetime limits. Parent PLUS loans continue to be exempt from the lifetime limit.
This timing of the reversal upset many student financial aid professionals. Melanie Storey, President of the National Association of Student Financial Aid Administrators (NASFAA), called on the ED to immediately issue clear guidance regarding the change and to prioritize timely, transparent communication moving forward. She said in a statement,
“With many schools preparing to issue financial aid offers in the coming weeks — and some doing so this month — this approach is both irresponsible and unfair to students and financial aid professionals who are working in good faith to make informed decisions amid inconsistent and incomplete information. When significant policy changes are rolled out without clear, formal, and widely distributed guidance, there are severe consequences that directly affect students who need definitive answers now in order to make plans to pay for college.”
Shortly after its Federal Student Aid Training Conference in March, ED also corrected its interpretation of whether loans borrowed before July 1, 2026, are subject to the lifetime limits. ED had previously said that these older loans would not be subject to the new lifetime limits but has since changed its position and stated that loans borrowed prior to July 1, 2026, will be counted in the new lifetime limits.
Future of the FSA Office
The FSA, a major office within the ED, has historically functioned as the Federal government’s hub for managing student financial aid programs. Its role has been broad but consistent over time in the administration of the core aid programs created under the Higher Education Act. This included Federal loans such as Direct and PLUS loans, Pell Grants, and Work-study funding. FSA handled everything from setting rules for how aid is awarded to disbursing funds and managing loans.
FSA has also performed the following functions with the ED:
- Managing the FAFSA system
- Loan servicing and repayment oversight
- Compliance and oversight of colleges
- Borrower assistance and default prevention
- Policy implementation
Dismantling the ED and the FSA
The ED has been controversial since its inception in 1979. The fundamental objection has been that education is not mentioned in the Constitution, making it a state and local responsibility. Critics argued the Federal government had no business creating a cabinet-level agency to oversee something the founders left to the states. Many saw it as a dangerous centralization of power over what children are taught. This controversy never went away. Calls to eliminate the ED resurfaced in the Trump Administration, which is now working toward that goal.
Moving FSA Functions
The Administration has released its plans for the future of the ED. The biggest change is a gradual transfer of FSA’s responsibilities away from ED. In March, ED and the Treasury Department announced the Federal Student Assistance Partnership under which Treasury will assume operational responsibility for collecting on defaulted Federal student loan debt, with plans to expand into non-defaulted loans and other FSA functions.
The Administration has also announced that the entire Federal student loan portfolio — $1.6 trillion in loans for 43 million borrowers — will be moved to the Small Business Administration. However, multiple FSA sources said the office was blindsided by this decision and is not prepared to execute the transfer yet.
The future of the ED remains uncertain as the Administration moves forward with plans to dismantle the entire agency. Secretary McMahon stated that the Administration is taking “bold action to break up the Federal education bureaucracy and return education to the states.” Complete elimination of the ED would require congressional approval and 60 votes in the Senate, which is considered unlikely. However, the Administration can cut back the Department’s functionality entirely.
The overarching goal of the Administration is to shrink ED’s footprint, transferring its functions to other departments like Treasury and the SBA, winding down broad loan forgiveness programs, and eliminating Federal involvement in student aid administration.
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