Federal student loan overhaul: What grad students, parents & expats should know
The upcoming Big Beautiful Bill brings sweeping changes to federal student loan programs, effective July 2026.
Whether you’re a graduate student, a parent borrower, or an expat juggling education expenses abroad, here’s a detailed breakdown – complete with practical advice to help you prepare.
Graduate student and parent loan caps
Graduate and professional students will see new fixed borrowing limits:
- Direct Unsubsidized Loans only: capped at $20,500 per year, with a $100,000 lifetime maximum.
- Professional programs (law, medicine, etc.): allow up to $50,000 per year, total cap $200,000.
- Grad PLUS loans eliminated, removing previous borrowing flexibility.
These ceilings mean students in high-cost programs – especially expats studying abroad – must explore private loans, employer sponsorships, or international scholarships to bridge any funding gaps.
Parent PLUS borrowers are also impacted:
- Annual limit of $20,000 per child, with a $65,000 total cap.
- Loss of income-driven repayment for new loans – only standard plans are allowed going forward.
If you’re a US parent living overseas, prepare to evaluate your funding options earlier and more thoroughly.
Repayment plans, deferment limits and expat impact
The loan repayment landscape has narrowed significantly:
-
Fewer repayment options: Most existing income-driven repayment plans (PAYE, SAVE, ICR) will be replaced by just two choices:
- A new streamlined IDR plan based on income and loan balance.
- The standard fixed repayment plan.
- Eliminated deferments: No more economic hardship or unemployment deferment.
- Limited forbearance: Only nine months allowed in any 24-month window.
- Parent PLUS borrowers lose access to both IDR and Public Service Loan Forgiveness (PSLF) if borrowing after July2026.
For US expats, this means careful income planning is crucial.
Foreign-earned income still counts toward repayment under IDR, and the lack of deferments removes an important safety net during overseas transitions or instability.
What this means for US expats
These changes carry special importance for those living abroad:
- Borrowing caps may constrain plans for pursuing graduate degrees internationally or supporting family members studying in the US.
- Repayment structure requires accurate income tracking across borders – some expats underestimate how foreign income affects US loan obligations.
- No deferment safety net means expats must proactively build emergency funds and explore flexible financing solutions.
The key takeaway: proactive, not reactive, planning.
Strategies to get ahead
Start preparing now, even if the changes don’t take effect until 2026:
- Check your loan status at studentaid.gov to understand remaining eligibility.
- Evaluate educational goals: if you’re crossing the borrowing cap soon, now’s the time to decide whether to accelerate studies or look for external funding.
- Compare financing options: private student loans, international scholarships, and employer tuition benefits could be crucial.
- Act before July 2026: older repayment plans may still be available, so consider lock-in opportunities while you can.
