KEY TAKEAWAYS
- In the “One Big, Beautiful Bill,” Congress expanded the ability of colleges to limit the amount of federal student loans offered.
- Now, schools can limit student loans across specific programs of study.
- Experts say this will allow colleges to prevent students in majors that typically result in lower wages from taking out more loans than they can handle.
Higher education institutions may limit the federal student loans that college students can take out next year, if they deem the student’s major more likely to default once they finish school.
In the ‘One Big Beautiful Bill,’ Congress implemented stricter student loan limits starting July 1, 2026. One of them allows financial aid administrators at colleges to limit the amount of loans offered to students and their parents in chosen degree programs, “as long as any such limit is applied consistently to all students enrolled in such program of study.”
Even before the bill, schools had the ability to limit federal student loans to a figure lower than the existing federal guidelines. Colleges typically restrict loans based on the student’s cost of attendance and the amount of other financial aid they received. The ‘One Big Beautiful Bill’ largely broadens schools’ ability to limit loans.
“I don’t think it’s going to be massive. The school is not going to look at every program and bring it all down by $2,000,” Megan Walter, senior policy analyst with the National Association of Student Financial Aid Administrators, told Investopedia. “I think it’ll be really specific to programs that they’re aware are already having issues with default, with students defaulting because their earnings are just not able to keep up with the amount of borrowing.”
Institutions are typically held responsible if a large number of graduates fall behind on their federal student loan payments. The school’s Cohort Default Rate measures the number of graduates who default within a certain period after entering repayment. If the institution’s CDR rate exceeds 40% for a year or exceeds 30% over three years, the school will lose the ability to distribute federal aid to its students, such as student loans and Pell Grants.
The new ability to restrict loans across specific majors will make it easier for schools to ensure students are not borrowing more than they can handle based on past default rates in specific programs of study, Walter said.
For instance, a 2025 report by the New York Fed found that recent graduates who studied education and social services are most likely to have lower wages. Additionally, graduates with degrees in criminal justice, liberal and performing arts, and medical technician majors are most likely to be underemployed. Both factors make it harder for borrowers to be on time with their student loans.
In a 2017 analysis by the New York Federal Reserve, researchers found that borrowers enrolled in associate degree programs or who major in the arts are most likely to default by their late twenties.