San Mateo, CA I usually write about IRS tax problems since my practice centers around IRS collection and audit resolution , however every once in a while some interesting tax and financial related items come across my desk that I think are worth mentioning. If you have kids in high school looking ahead to college or kids in college looking at graduate school and you are wondering--how will I pay for this---this is article is for you. Student Loan Changes are in effect: Starting this July, the way students borrow money for college and graduate school is getting a significant overhaul. New rules will reshape borrowing limits, phase out certain loan types entirely, and for the first time, draw a sharper line between graduate and professional degrees when deciding how much a student can take on. Most of these changes kick in July 1, 2026, and affect federal loans first disbursed for the 2026–2027 academic year. If your kids are already in school, take a breath — many of these rules won't touch you. They're largely aimed at incoming students. Undergraduate borrowing? Nothing changes. For all the commotion surrounding these program reforms, undergraduate loan limits are staying exactly where they've been. Federal Direct Loans remain the main-stay of student aid for four-year programs, and the annual caps haven't moved. Here's a basic breakdown: Dependent students can borrow up to $5,500 in their first year, $6,500 in their second, and $7,500 annually after that. Independent students get more room — $9,500 in year one, $10,500 in year two, and $12,500 per year from there on. Lifetime caps sit at $31,000 for dependent students and $57,500 for independent ones. These numbers haven't budged in years, and since they're not tied to inflation, they now cover a noticeably smaller slice of what college actually costs than they once did. Dependent or Independent--What does that mean: Whether a student qualifies as "independent" matters quite a bit here, since that status unlocks higher limits. Under Section 480(d) of the Higher Education Act, you're considered independent if you're 24 or older, married, have dependents of your own, are enrolled in a graduate or professional program, have served in the military, are an emancipated minor or ward of the court, grew up in foster care, or are a homeless youth — among a few other qualifying circumstances. Because loans rarely cover the full bill anyway, most undergraduates piece together the rest through scholarships, grants, family contributions, 529 savings plans, part-time jobs, and sometimes Parent PLUS or private loans. Graduate students are facing the biggest changes. This is where the 2026 reforms really have a bite. Under the old system, graduate students could stack Direct Loans on top of Graduate PLUS Loans, which allowed borrowing all the way up to the cost of attendance — tuition, housing, food, everything. That flexibility is gone . Graduate PLUS Loans are being eliminated for new borrowers. Going forward, most graduate students will be limited to $20,500 per year, with a lifetime cap of $100,000 for all graduate borrowing. There is an exception carved out for a narrow tier of professional degrees: medicine, dentistry, law, and a few others. Those students can borrow up to $50,000 per year and $200,000 over the course of their studies. Worth noting: unlike before, these new caps aren't pegged to the cost of attendance. That means federal loans may no longer stretch far enough to cover both tuition and living expenses, leaving students to find other ways to fill the gap. Families borrowing through Parent PLUS loans will feel it too. The changes don't stop with students. Parent PLUS loans — long used as an additional source of college funds— are also getting capped. Where parents could previously borrow up to the full cost of attendance, they'll now be limited to $20,000 per year per child, with a lifetime ceiling of $65,000 per student. Since these loans land on the parent's credit and the parent is responsible for repayment, families who've relied heavily on Parent PLUS to afford higher-cost schools may find themselves rethinking their options. Scholarships, savings, and more affordable educational pathways are likely to become a bigger part of the conversation going forward. Have questions about how this affects your family? These changes may not show up on a tax return, but they're very much a part of your financial picture. Where loans in the past have made up a large part of financing college tuition and living expenses, new changes may limit those options. Remember to always verify your circumstances with a college financial planner or college advisor. These are general provisions designed as an overview of changes. Your individual circumstances may vary. Kevin Rego Law Office of Kevin Rego 650.933.5222  Disclaimer: The information provided is intended to provide a general overview of the topic presented at the time of publication. Tax laws change and you should always consult a tax professional for the latest tax law. This article is not intended to be a legal interpretation of your individual tax or legal situation. If there is a conflict between the information provided and any legal authority implementing or interpreting the topic, the legal authority shall prevail. Always seek legal advice from a licensed attorney. This article does not in any way establish an attorney-client relationship. That relationship can only be accomplished with both parties signing a mutual, written agreement.