Student Loan Caps Drive $2.9 Billion Shift to Private Lenders

SoFi reported in late October that its student loan originations reached $2.9 billion in the third quarter. This figure represents nearly a doubling compared to the same period last year. The surge coincides with new federal limits on graduate student borrowing that took effect this fall.

The shift toward private debt is evident across the market. Sallie Mae, which controls more than half of the private student loan sector, stated that graduate loans increased by 119 percent year over year. These changes stem from President Donald Trump’s “Big Beautiful Bill,” which established new caps on federal borrowing.

Under the new rules, programs designated as professional degrees face a federal loan cap of $200,000. Other graduate programs are limited to $100,000 in total federal borrowing. Previously, graduate students could access federal loans up to the full cost of their degree. New borrowers also face an overall lifetime borrowing cap of $257,500.

Jordan Matsudaira, director of the Postsecondary Education & Economics Research Center at American University, estimated that more than 500,000 borrowers will need to secure an additional $20,000 per year from outside the federal program. His analysis indicated that students in high-cost fields such as medicine, law, and dentistry face the greatest pressure.

Colleges are responding to the gap in federal funding. The University of Kansas School of Law has approved eight private loans to date, with more in process. Steven Freedman, the school’s associate dean of admissions, noted that private banks now determine access for many students. At Lewis & Clark College in Portland, Oregon, the aid office has observed a rise in private loans and introduced a new scholarship this fall for students affected by the caps.

The transition has created administrative delays. A legal dispute over which programs qualify as professional degrees extended until just before the new rules took effect. A federal judge later blocked part of the rule, allowing fields like nursing and physical therapy to access higher limits. Kristina Ortiz Donohue, vice president for strategic enrollment at the University of Mount Saint Vincent, said the last-minute changes slowed software updates and delayed financial aid packages.

Marc Schoonover, general manager of lender ELFI, said the number of students unable to find financing is smaller than initially feared. However, some students are using personal savings to cover costs. Madison Jessen, a first-year physician assistant student at Weill Cornell Medicine, used most of her savings for her first semester. Her experience reflects a growing trend among students navigating the new loan environment.