What you need to know about new federal student loan caps and repayment options

By Mandi Neff, Senior Strategist, Regulatory and Policy
and Megan Mortimer, Federal Legislative and Regulatory Affairs Manager

Borrowing enough money to pay for a medical degree and repaying those loans will become more challenging if a final rule regarding student debt survives court challenges.

Regardless of how potential legal battles are resolved in the long term, medical students, residents and family physicians with federal student loans need to be prepared for changes being implemented by the Department of Education through Reimagining and Improving Student Debt Education (RISE), which finalizes significant changes to federal student loan borrowing and repayment programs under H.R. 1.

The new rule ends the Graduate PLUS program, which allowed medical students to borrow federal funds up to the full cost of attendance, and places new federal borrowing caps—$50,000 per year and $200,000 total—on professional students (including those in allopathic and osteopathic medical programs).

Students planning to borrow federal funds for the new academic year should note that the $50,000 annual limit takes effect July 1. Individuals needing funds above that amount will need to utilize private loans or secure other non-federal funding after that date.

Additionally, schools now may impose their own borrowing limits lower than the new federal caps.

There is a narrow exception to new loan limits for those enrolled in a program as of June 30 who received at least one federal Direct loan for that program prior to July 1. Those who qualify will be exempt from loan limits and most loan eligibility changes for the lesser of

• Three academic years, or
• The difference between the published length of the program of study and the period of time you have completed in that program.

Students must maintain enrollment in their specific program at their current institution after July 1 in order to qualify for the exemption. Loan limits and exceptions are detailed on the Federal Student Aid website. That site also offers guidance for professional students based on whether they are new professional student borrowers whose first loans will be disbursed on or after July 1 or professional student borrowers who have existing loans and will receive additional loans after July 1.

The new rule sunsets most existing repayment options and finalizes two new plans. Existing borrowers may retain some legacy plans, but new borrowers will face simplified and limited choices:

• Under the Repayment Assistance Plan, a borrower’s required monthly payment is based on income and number of dependents.
• Under the Tiered Standard Repayment Plan, a borrower’s required monthly payment is based on debt, interest rate and repayment period.

Borrowers may now rehabilitate a defaulted federal loan twice per loan, instead of once, which is one positive provision in the new rule the AAFP had supported.

The AAFP offered significant input during the rulemaking process and will continue to work with the administration to find solutions. The Academy, which opposed borrowing caps and elimination of the Graduate PLUS program, will be closely monitoring lawsuits related to the new rule and remain engaged with the PSLF Coalition, a group of more than 100 nonprofit and public service organizations committed to supporting the Public Service Loan Forgiveness program and advocating on behalf of borrowers who utilize federal loan programs.

Though the rule has been finalized, the AAFP will continue working to inform Congress and congressional staff how the regulation poses a burden on learners and threatens the primary care workforce and, ultimately, patient access to care. Academy members can help by sharing your stories about how these new student loan caps and regulations are directly impacting you.

Though we have an abundance of data about the value of primary care and the burden of medical school debt, lawmakers equally value hearing directly from their family physician constituents about the difficulty you face in navigating these new rules as they go into effect. With the new challenges these rules will create for you, your peers, patients, institutions and communities, it is more important than ever that your voice is heard on Capitol Hill.