Repaying higher education debt could become easier under a new federal student loan system proposed Thursday by the U.S. Department of Education.
“With consensus reached in support of the department’s proposed rule, we have a clear path forward to fulfill the president’s promise of making higher education more affordable and ensuring that every professional in America – from teachers and nurses to physicians and clergy – can pursue their careers without taking on debt they may never be able to repay,” Under Secretary of Education Nicholas Kent said in a statement.
The department’s Notice of Proposed Rulemaking offers what Kent called a “once-in-a-generation opportunity to lower tuition costs” and better support borrowers. The proposal follows provisions in President Donald Trump’s Working Families Tax Cuts Act, often referred to as the One Big Beautiful Bill, which Congress passed in July 2025.
Graduate programs account for a growing share of federal student loans and the majority of repayment plans, according to the department. To address rising borrowing and tuition costs, the proposed rule would eliminate the Grad PLUS program, which allows unlimited borrowing for graduate students.
In its place, the proposal sets “commonsense annual and aggregate loan caps for graduate and professional programs,” the department said.
“These new caps will compel colleges and universities to prioritize students and incentivize institutions to reduce tuition and fees, making higher education more affordable and preventing students from being burdened with unmanageable debt after graduation,” the department said.
The proposal would also allow institutions to set their own program-level loan caps, even below federal limits.
“These stricter borrowing limits would provide colleges and universities with the authority to set appropriate loan caps tied to the true cost of an academic program, helping to prevent overborrowing in programs with lower earnings or higher default rates,” the department said.
The rule would also establish a Repayment Assistance Plan, which would consolidate existing options into a tiered, income-driven repayment system. Under the plan, loans would be repaid over 10, 15, 20 or 25 years, depending on the loan balance, with longer terms and lower annual payments for borrowers with higher debt.
The plan would prevent unpaid interest from accumulating for borrowers who make on-time payments and would allow borrowers to rehabilitate a defaulted loan more than once. Under the current system, borrowers generally have only one opportunity to restore a loan from default status.
Following a 30-day public comment period, the department will review the feedback and finalize the rule.
