Why Americans Will Get Less Help Paying for College

What It Covers

Ron Lieber explains two federal student loan policy changes effective July 1, 2025: new borrowing caps limiting parent PLUS loans to $20,000 annually ($65,000 total) and graduate loans to $20,500–$50,000 annually, plus an earnings test that cuts federal loan access to programs whose graduates underperform high school earners.

Key Questions Answered

• •Parent PLUS Loan Caps: Parents can now borrow a maximum of $20,000 per year and $65,000 total through federal PLUS loans for undergraduate students. Since some universities charge over $100,000 annually for tuition and room and board combined, families facing this gap must identify alternative funding sources — private loans, institutional grants, or lower-cost schools — before enrollment decisions are made.
• •Graduate Loan Limits by Program Type: Federal graduate loans are now capped at $20,500 annually ($100,000 aggregate) for standard master's programs, and $50,000 annually ($200,000 aggregate) for professional programs like law, medicine, and business school. Students should verify whether their specific program qualifies as "professional" under the new rules, as ongoing litigation means classifications remain unsettled.
• •Earnings Test Mechanism: Programs whose alumni fail to out-earn state-level high school graduates (ages 25–34) in two out of three consecutive measurement years will lose federal loan eligibility entirely. For graduate programs, the benchmark is median earnings of bachelor's degree holders aged 25–34. Prospective students should research program-specific earnings data before borrowing, as religion and fine arts degrees are flagged as high-risk.
• •14,000 New Master's Programs Created: Between roughly 2005 and 2025, universities launched approximately 14,000 new master's degree programs, many designed as revenue generators requiring no expensive labs or infrastructure. Students should scrutinize any master's program created within the last decade by requesting concrete alumni earnings data and career placement rates directly from the institution before committing to borrowing.
• •Public Service Loan Forgiveness Complexity: Borrowers pursuing the 10-year public service forgiveness path face significant administrative failure risk — incorrect repayment plan enrollment, non-qualifying employers, or paperwork errors can invalidate years of payments. Anyone relying on this program should annually certify employment eligibility, confirm their repayment plan qualifies, and maintain documentation rather than assuming compliance.