Private loan borrowing surges

Private student loan originations reached $2.9 billion in the third quarter, nearly doubling from the same period a year ago, according to financial reports from SoFi. Sallie Mae reported that graduate loans increased 119 percent year-over-year. These figures reflect a shift in how students finance higher education following new federal regulations that took effect in the fall of 2026.

The changes stem from the “Big Beautiful Bill,” signed by President Donald Trump. The legislation capped federal borrowing for new graduate students. Programs designated as professional degrees, such as medicine and law, face a limit of $200,000. Other graduate programs are capped at $100,000. Before these rules, graduate students could borrow federal funds up to the full cost of their degree. New borrowers also face a lifetime cap of $257,500, and limits were placed on the amount parents can borrow for their children’s schooling.

Jordan Matsudaira, director of the Postsecondary Education and Economics Research Center at American University, estimated that more than half a million borrowers will need to find an extra $20,000 a year from sources other than the federal program. His analysis identified students in high-cost fields like dentistry and states with a high cost of living as the most affected. The Trump administration argued the limits would curb excessive borrowing and force schools to evaluate costs. The American Enterprise Institute reported that at least 40 schools cut program costs since the caps took effect.

Colleges have responded by increasing private lending or creating new aid. The University of Kansas School of Law began its own lending program and approved eight loans so far. Steven Freedman, associate dean of admissions, noted that private banks now determine access to law school. At Lewis & Clark College in Portland, Oregon, the student aid office reported a rise in private loans. Anastacia Dillon, associate vice president for financial aid, described the changes as really disruptive. A new scholarship was introduced in the graduate school of education and counseling for students facing financial need due to the caps.

Uncertainty about which programs qualified as professional degrees caused delays. A federal judge blocked part of a rule that would have held nursing and physical therapy students to lower limits, allowing them to access higher federal loans. This legal fight extended until days before the rule took effect. Kristina Ortiz Donohue, vice president for strategic enrollment and retention at the University of Mount Saint Vincent, said the changes slowed software updates needed to process loans. Jon Witter, CEO of Sallie Mae, said the peak lending season extended into October.

Chloe Frabotta, a 25-year-old physician assistant student in New York City, borrowed $6,000 in federal loans for her first trimester. She took out private loans for the remainder, with her mother as a cosigner. Her program was ultimately deemed professional, allowing up to $50,000 annually in federal loans, but she feared further changes. Dr. Robert Harrington, dean of Weill Cornell Medicine, said the school received dozens of calls from confused students and families. He expressed concern that programs might become accessible only to those whose families can afford the bill.