Fed Steps Back, Private Lenders Step Up

President Trump's new reconciliation law is shaking up student lending. It slashes the federal government's role in a market that's worth around $1.7 trillion and nudges more borrowers toward private loans. It all kicks in July 1, 2026, so students and parents have just under a year to plan.

Graduate students will now be capped at borrowing $100,000 for master's programs and $200,000 for professional degrees like law or medicine. Parents using the PLUS loan program can borrow only $20,000 per year and up to $65,000 per child. The Graduate PLUS option vanishes entirely. It's a big shift from today's borrow the full cost of attendance rules.

Lenders such as SoFi Technologies SOFI are already sharpening their pencils. CEO Anthony Noto says that if the government steps back, private lenders will happily fill the gapand they typically charge higher rates and want strong cosigners. SoFi's stock has climbed about fourteen percent in the past week and nearly forty percent year to date as investors spot this opportunity.

For students without pristine credit or a willing cosigner, this could mean paying more over time or facing tougher approval hurdles. Colleges might also feel a squeeze to keep tuition growth in check, knowing their students have fewer federal loan options. Taxpayers, meanwhile, get some relief from the risks of ever-rising federal loan balances.

Keep an eye on SoFi, Sallie Mae SLM and Nelnet SLM as they gear up for a surge in private loan originations. Regulators may step in if the cost to students jumps too sharply, so this story is just getting started.