Under the One Big Beautiful Bill Act, the Trump Administration has announced a series of changes to federal student-loan policy set to take effect in July 2026. These measures include capping the total amount students can borrow and eliminating the Grad PLUS Program, which previously allowed graduate and professional students to borrow up to the full cost of their programs. This overhaul signals the end of several Biden-era initiatives, most notably the Saving on a Valuable Education (SAVE) Plan. A district judge recently invalidated the rule authorizing the SAVE Plan, which had allowed borrowers to make payments based on their income and family size. Borrowers who fail to transition to alternative administration-approved plans within two years face the risk of their loan balances increasing due to accruing interest.
Proponents of the new federal rules argue that limiting debt accumulation will make successful repayment more likely and discourage universities from continuing to raise tuition. Critics, however, contend that these changes may hinder low-income students’ access to high-cost professions such as medicine and law. Analysts predict that these students may turn to private loans to cover gaps in funding, though private lenders may be reluctant to extend credit to borrowers with precarious financial profiles. The complexity of navigating these shifting repayment plans and forgiveness programs has been described by experts as a source of significant stress for borrowers, many of whom feel “whiplashed” by the rapid policy reversals of the past five years, which included a pandemic-era payment pause and subsequent cancellation of some debts that was later reversed by the courts.
Against this backdrop of federal tightening, some private colleges are moving in the opposite direction to attract students. Carleton College, a selective liberal arts institution in Minnesota, has announced it will eliminate loans from its financial aid packages beginning next fall. This makes Carleton the first college in the state to adopt a no-loan policy and one of only about 20 nationally to do so. The university will meet 100% of every student’s demonstrated financial need exclusively through grants, scholarships, and student employment, with no specific income restriction for eligibility beyond qualifying for need-based aid.
The implementation of this policy is funded by over $80 million in early gifts from alumni and trustees, with the college seeking an additional $48 million in endowment to ensure long-term sustainability. For the 2026-27 academic year, the average financial aid award at Carleton is $71,866, meaning the average family receiving aid pays approximately $21,763. The no-loan policy will benefit current first-year, sophomore, and junior students, as well as new enrollees. President Alison Byerly stated that the goal is to ensure that family finances do not limit a student’s career or educational choices, such as pursuing internships or study abroad opportunities.
Carleton’s move contrasts with the national trend where the average debt at graduation for the Class of 2025 is $21,075, well below the national average of $39,075. Despite this lower average, disparities in federal borrowing persist across demographic lines. Black undergraduate students are more likely to take out federal loans than their white peers and owe an average of $25,000 more four years after graduation. Similarly, Black graduate students borrow at rates of 40%, compared to 22% for white students seeking advanced degrees. Women with bachelor’s degrees also hold nearly 4% more debt than their male counterparts. Experts warn that these existing disparities may be exacerbated by the new federal borrowing caps, potentially widening the wealth gap between racial and gender groups.
The immediate impact of the July 2026 policy change will depend on how borrowers navigate the transition from the invalidated SAVE Plan to new alternatives. Meanwhile, the effectiveness of institutional no-loan policies will be tested by their ability to sustain funding without increasing tuition for other students or relying on volatile private markets.
