Tighter federal loan rules send more grad students hunting for private credit

New federal borrowing limits have forced many graduate students to turn to private lenders to cover their education costs.

The changes took effect in the fall of 2026 and impose strict caps on loan amounts. Professional degree programs, such as medicine and law, now face a federal loan cap of $200,000. Other graduate programs are limited to $100,000. Previously, students could borrow the full cost of their degree. New borrowers also face a lifetime cap of $257,500 and limits on how much parents can borrow for their children.

Chloe Frabotta, a 25-year-old physician assistant student in New York City, felt the impact immediately. Weeks before her program started, it was unclear if her field would qualify for higher limits. She borrowed about $6,000 in federal loans for her first term and took out private loans for the rest, with her mother as a cosigner. Frabotta said she accepted the private debt as a necessary step to start her studies. She ultimately qualified for up to $50,000 annually in federal loans but chose to borrow less out of caution regarding future rule changes.

Banks have seen a sharp rise in private student lending. SoFi reported that student loan originations reached $2.9 billion in the third quarter of 2026, nearly double the amount from a year earlier. Sallie Mae, which holds more than half of the private student loan market, stated that graduate loans increased by 119% year-over-year. Jordan Matsudaira, director of the Postsecondary Education & Economics Research Center at American University, estimated that more than half a million borrowers will need an extra $20,000 a year from non-federal sources once the changes are fully phased in.

Students are finding creative ways to bridge the gap. Darian Bogie, a 25-year-old dental student at Howard University, was denied by several private lenders. He launched a crowdfunding campaign and raised approximately $76,000 for his first year. Bogie described the response as beautifully overwhelming. His father, a sanitation worker, had paid out of pocket in previous years but lacked the credit history to cosign a large loan.

Colleges are also adjusting their financial aid strategies. South Carolina Student Loan reported a 400% increase in graduate student borrowing this year. The University of Kansas School of Law began issuing its own loans, approving eight so far. Steven Freedman, the school's associate dean of admissions, noted that private banks now have significant influence over who can attend law school. At Lewis & Clark College in Portland, Oregon, staff reported a rise in private loans and introduced a new scholarship for students affected by the caps.

The Trump administration argues the limits will curb excessive borrowing and encourage schools to review their costs. The American Enterprise Institute reported that at least 40 schools have cut the cost of some programs since the caps took effect. Critics, however, warn that the changes create barriers for students from lower-income families. Dr. Robert Harrington, dean of Weill Cornell Medicine, said the school received many calls from confused families. He fears the new rules could make medical programs accessible only to those with family wealth.

A legal dispute over which programs qualify as professional delayed the finalization of the rules until days before implementation. A federal judge blocked part of the administration's rule, allowing nursing and physical therapy students to access higher loan limits. Jon Witter, CEO of Sallie Mae, said the delays extended the peak lending season into October. Marc Schoonover, general manager of lender ELFI, stated that while more students are using private loans, fewer are being denied entirely than initially feared.