Your School Can Now Set a Lower Federal Loan Limit for Your Program

What the Rule Allows

The 2025 law amended the Higher Education Act to let schools cap federal loans by program. ED's regulation puts it this way: a school may "limit the total amount of Direct Subsidized, Unsubsidized, and PLUS loans that a student, or a parent on behalf of such student, may borrow for a program of study for an academic year, as long as any such limit is applied consistently to all students enrolled in that program of study" (34 CFR 685.203(m)(2)). ED announced the new authority in Dear Colleague Letter GEN-26-02 on June 26, 2026.

A school-set limit can apply to:

• •Undergraduates' own loans. Federal limits for undergraduates didn't change (for example, $5,500 in the first year for a dependent student), but a school can now set a lower one for a program.
• •Parent PLUS. A parent borrowing for a student in the program can be capped below the federal $20,000 a year.
• •Graduate and professional loans. A program's students can be capped below $20,500 a year for graduate programs or $50,000 for professional programs.

The authority is optional. ED's final rule says it "does not require institutions to establish lower loan caps, nor does it alter the statutory maximum loan amounts" (91 FR 23831). If your school doesn't use it, the federal limits apply.

What Your School Must Do First

1. 1 Apply the same limit to every student in the program. For this rule, a "program of study" means the eligible program, not a course load, a group of students within the program, or one borrower (91 FR 23831).
2. 2 Document the decision and keep the records for federal review.
3. 3 Publish "clear and conspicuous" information about which programs have a limit and explain why, including in the course catalog, on the school's website, and in award notifications.
4. 4 Notify students who plan to enroll or are enrolled in the program before the limit takes effect.

ED also said it expects schools to make the decision before a new academic year starts, so students have time to plan (91 FR 23830–31). Commenters asked for more guardrails, such as limits on how schools choose programs. ED declined, saying the consistency and disclosure requirements are enough.

Which Programs Might Get a Lower Limit

ED's letter gives schools ideas, not requirements. It suggests lower limits for professional programs "associated with lower post-graduate earnings, as reflected in the College Scorecard and the FAFSA Earnings Indicator, or with higher rates of delinquency and default." For undergraduate and graduate programs, it suggests schools weigh annual limits against the new total caps and what the program costs.

A second suggestion came with the court-ordered professional-degree list. ED said schools "may wish to consider" holding programs that are only temporarily classified as professional (MSN, DNP, physician assistant, physical therapy, and others) to the $20,500 graduate limit while the case goes on (EA GENERAL-26-42). Our guide to nursing, PA, and PT on the professional-degree list covers that case.

Part-Time Students Get Reduced Further

Also starting July 1, 2026, annual Direct Loan limits shrink in proportion to less-than-full-time enrollment in term-based programs. When a school sets its own limit, ED's final rule says that reduction applies to the school's limit, and financial aid administrators can't use professional judgment to restore the full amount (91 FR 23830).

A Program Limit Is Not the Same as a Case-by-Case Cut

Schools already had a narrower power, and they still have it. Under 34 CFR 685.301(a)(8), a school may refuse to originate a Direct Loan, or reduce one, for an individual student, if the decision is made case by case, documented, and "provided to the borrower in writing."

If your loan offer comes in below the federal limit, ask which one it is. The answer tells you whether it applies to everyone in your program or just to you.

What to Check Before You Enroll

1. 1 Search the school's course catalog and financial aid website for any program-level loan limit on your program. Schools must publish them.
2. 2 Read your award notification. A school-set limit must appear there too.
3. 3 Ask the aid office: does my program have a school-set Direct Loan limit, and does it also limit my parent's PLUS loans?
4. 4 If you have the interim exception (the old pre-July 2026 limits), ask whether the school's limit applies to your loans.
5. 5 If you're comparing schools, compare the loan you can actually get at each one, not just the federal maximum.

Studentaid.gov also reminds borrowers that the actual amount you can borrow may be less than the federal maximum, since you can't borrow more than your cost of attendance minus other aid. If a limit leaves a gap, our Parent PLUS gap calculator helps parents see how much of the cost is left to cover.