New federal loan restrictions passed as part of President Donald Trump’s One Big Beautiful Bill Act are expected to reshape how thousands of students at the University of Wisconsin-Madison pay for their education, potentially increasing reliance on private loans and reducing access for low-income families.
The reconciliation bill, signed into law on July 4, imposes limits on federal loan programs that previously offered more flexibility to parents, graduate students and professional students. UW-Madison’s financial aid office warns the shift could disproportionately affect future borrowers, especially those in high-cost academic programs.
“Persons needing to borrow to fund their education will see an impact from the reconciliation bill,” said John Lucas, UW-Madison spokesperson. “The overall reduction in availability of these federal loans will likely result in increased reliance on borrowing through private sources.”
Under the new law, Parent PLUS loans — federal loans issued to parents of dependent undergraduate students — will be capped at $20,000 per year and $65,000 in total over the course of a student’s academic career. Previously, the loan had no specific limit, other than the cost of attendance.
In addition, Graduate PLUS loans, which have helped graduate and professional students cover costs beyond traditional federal loans, will be eliminated for new borrowers beginning in the 2026-27 academic year.
The majority of UW-Madison students graduate without debt, however, among those who do take out student loans the average amount of debt is $27,000.
To help offset the impact, the law raised the limit on unsubsidized loans, another kind of federal loan for graduate and professional students, from $20,500 to $50,000 annually.
At a press conference in May, UW System President Jay Rothman and other higher education leaders across the state warned the bill would restrict access to college for thousands of students.
“For generations, the federal government has helped ensure that students and families from all socioeconomic backgrounds are offered life-changing experiences,” Rothman said. “Those opportunities are now in jeopardy.”
One of those opportunities is the ability to receive a Pell Grant, a federal aid program for low-income students.
The law raises the full-time enrollment requirement for a full Pell Grant from 12 to 15 credit hours per semester and limits eligibility to students enrolled at least half-time.
More than 31,000 UW System students currently receive Pell Grants, and system officials say changes to Pell Grant eligibility could limit access to higher education.
While current borrowers will be allowed to continue under the existing loan terms for up to three more years, incoming students in the fall of 2026 and beyond will face a dramatically different financial aid landscape.
As students and families prepare for the upcoming academic year, UW-Madison’s Office of Student Financial Aid is advising borrowers to start planning now and to explore all available funding options, including scholarships, work-study and responsible borrowing through private lenders.
“We expect an adjustment period,” Lucas said, “but our priority remains ensuring that students can access the education they’ve earned, regardless of how much they can pay upfront.”
Alaina Walsh is the associate news editor for The Daily Cardinal. She has covered breaking news on city crimes and a variety of state and campus stories, including the 2024 presidential election and the UW-Madison budget.
