Private Student Borrowing Rises as Federal Loan Caps Take Effect

Private student lenders are reporting sharp increases in borrowing as federal loan caps take effect.

By Career Ahead AI · United States — AI-assisted, fact-verified against cited sources. Readers should verify key facts.

Private lender figures show rising student borrowing

SoFi reported student loan originations of $2.9 billion in the third quarter, nearly double the amount from a year earlier. Days earlier, Sallie Mae said its graduate loans had risen 119% year over year. Sallie Mae controls more than half of the private student loan market. The figures track different parts of lending: SoFi’s total student loan originations and Sallie Mae’s graduate loans. Both lenders reported increases, with the graduate-loan measure showing a steep year-over-year rise.^¹

Federal borrowing limits vary by program type. Programs designated as professional degrees face a federal student loan cap of $200,000, while other graduate programs are capped at $100,000. New borrowers also face an overall lifetime borrowing cap of $257,500, alongside limits on how much parents can borrow for their children’s schooling. The graduate caps and lifetime limit set different boundaries: one depends on the type of program, while the other applies to a borrower’s total borrowing over time.^¹

Programs designated as professional degrees face a federal student loan cap of $200,000, while other graduate programs are capped at $100,000.

Jordan Matsudaira, director of the Postsecondary Education & Economics Research Center at American University, estimated that more than half a million borrowers would need to find an extra $20,000 a year outside the federal loan program when the changes are fully phased in. His estimate describes both the number of affected borrowers and the annual amount they may need from other sources. It points to a possible financing gap for students whose borrowing needs exceed the federal limits.^¹

You may also like

Education & University Insights

Former Students Sue over Student Loan Discharges

The case challenges the department’s handling of relief for borrowers from closed for-profit colleges.

Read More →

Some schools are cutting program costs as limits take effect

At least 40 schools have cut the cost of at least some programs since the loan caps took effect, according to the American Enterprise Institute. The changes do not necessarily cover every program at those schools: the reported cost reductions apply to at least some of their offerings. The count shows one institutional response alongside increased private lending, as schools adjust costs while federal borrowing limits shape how much students can borrow.^¹

Graduate student borrowing at South Carolina Student Loan increased 400% this year. The lender rolled out more options to help students as borrowing rose. The figure measures growth in graduate borrowing at that lender, rather than a change across all student loans or all private lenders. Its expansion of options is one response described alongside the rise in borrowing, while the federal caps set separate limits for professional-degree and other graduate programs.^¹²

College aid offices report more reliance on private loans

The University of Kansas School of Law has approved eight loans so far, with more in process. Steven Freedman, associate dean of admissions at the school, said the loans are important to help provide access to all students. The approvals are a count from one law school, not a total for the university or a measure of all private borrowing. Freedman’s comment connects the school’s loan approvals with its effort to provide access.^¹

Lewis & Clark College, a private liberal arts school in Portland, Oregon, has seen more private student loans through its student aid office. Anastacia Dillon, the college’s associate vice president for financial aid, described the changes as “really disruptive.” Her account links the increase in private loans with the changes affecting student borrowing. The college’s experience is a campus-level report, distinct from lender-wide figures on originations and graduate loans.^¹

At the University of Mount Saint Vincent in the Bronx, more first-year students are relying on private loans, even as the school has boosted aid to students in financial need. The increase therefore appears alongside an expansion of the school’s aid for those students. The information does not specify how many first-year students use private loans or the size of the aid increase; it describes a change in reliance and the school’s response to financial need.^¹

You may also like

Education & University Insights

Texas Democrats Take Power as Education Policy Faces a Test

Texas Democrats campaigned on K-12 education and can replace university regents, while Republican control of the Senate remains.

Read More →

Steven Freedman, associate dean of admissions at the school, said the loans are important to help provide access to all students.

Check Your Graduate Loan Cap Before You Enroll

If you are weighing a graduate or professional program, check the federal cap for your specific field first. Professional degrees face a $200,000 cap, while other graduate programs stop at $100,000, and new borrowers have a $257,500 lifetime limit. Those caps change what you can borrow, and the gap can be large: more than half a million borrowers may need an extra $20,000 a year from outside the federal system. That means a private loan, a scholarship, or a lower-cost school is part of the plan, not an afterthought.^¹

Your choice of school also matters more now. At least 40 schools have cut program costs since the caps took effect, so compare tuition across programs before you commit. If you do need private borrowing, expect lenders to compete: graduate borrowing at one lender rose 400% this year, and another lender nearly doubled its originations. Ask about rates, repayment terms, and what happens if you cannot pay, because private loans carry different protections than federal ones.^¹²