ED Changes Grad PLUS Rule: Credit Hours Now Decide Who Keeps Uncapped Student Loans

0:00Before we get to today's show, I wanted to share a quick reminder that being financially organized is one of the biggest factors in building wealth. Want to be a millionaire? It's not going to happen if you're not organized with your money. So how can you get organized? Well, our favorite app is Empower. It's free. It allows you to connect your banks and brokers, and it gives you daily income and expense updates. Ready to try it out? You can sign up at thecollegeinvestor.com slash Empower Money. Hello and welcome to this episode of The College Investor Audio Show. We're so glad you're hanging out with us today. If you like any topic we talk about on the podcast, you can always find the article with it at thecollegeinvestor.com. Ask questions, get to know us, and all the things on social media. Type in the words, the college investor, and you're going to find us there as well. All right, so today's article is The Education Department Changes Grad Plus Rule. The college's student hours now decide who keeps uncapped student loans.

1:01Interesting. So the education department has quietly changed how it decides whether continuing graduate students can still borrow uncapped grad plus loans, and the change is already generating denials for students who have been enrolled. During an August 12th federal student aid webinar on the implementation of new loan limits and the interim exception for continuing students, FSA staff told schools to calculate expected time to credential using credit hours completed rather than time enrolled. That formula determines how much longer a grandfathered borrower keeps access to grad plus after the program formally ended July 1st of 26th. The National Association of Student Financial Aid Administrators called it a significant departure from prior guidance, noting that ED had previously told schools to measure the difference between program lengths and weeks, months, or years, and the portion the student finished before July 1st. Education Department spokesperson Ellen Keast told Inside Higher Ed the approach is not

2:06anything new and had come up an earlier virtual office hours, though the department did not point to where it was written down. When ED finalized the loan limits and new repayment plans, the written record pointed the other way, actually, the final rule, and the department's May 20th loan limits FAQ, both described the calculation in terms of time. Here's why it matters. Congress eliminated grad plus and capped graduate school borrowing with the one big beautiful bill act and those limits took effect July 1st of 2026. Students already using a grad plus loan were grandfathered for up to three years, or the standard length of their program, whichever comes first. New graduate borrowers face a $20,500 a year and $100,000 lifetime for masters and doctoral students, $50,000 a year and $200,000 lifetime for professional programs like medicine and law. For a student halfway through a program, the difference between the two formulas is the

3:07difference between being able to borrow to finish the degree and a funding gap. Under the rules posted as recently as May 2026, remaining eligibility tracked the calendar. Under the new one, it tracks the transcript credit hours and the borrowing math changes accordingly. The credit hour math. Take a 36 hour master's degree program with a standard two year length. Okay. So a student who enrolled in fall of 25 and completed one academic year before July 1st of 2026 would have roughly one year of grandfathered eligibility left under a time based calculation, regardless of how many hours they actually finished. So that would be the reading schools planned around after Congress voted to end grad plus in 2026. Swap in credit hours and the answer moves in both directions. A part time student who finished nine of 36 credits in that same year has completed 25% of the program.

4:07For credit hour math, 75% of the program length remains, which is more runway than the calendar calculation then. This is the group most likely to benefit. A full time student who front loaded 24 36 hours has burned through two thirds of the program on paper. If sequenced coursework, a clinical placement or a thesis still requires three more terms, the credit count says they are nearly done while the degree requirements say otherwise. The three year outer limit still applies either way. So no formula extends eligibility past that ceiling. There's a second wrinkle here too for anyone who stepped away. The interim exception requires continuous enrollment. So a skipped term can end grandfathered access on its own before the credit hour question even ever comes up. Students who took a leave of absence or dropped to less than half time or even transferred between schools should confirm their status separately from the eligibility math because the rules that govern federal borrowing limits treat a break in enrollment a little bit

5:11differently. The front loaded scenario is where most complaints are clustering. Students who are enrolled in good standing and still short of a degree, but whose financial aid office is now telling them the interim exception has run out. How your financial aid package is awarded determines whether that gap surfaces in September or next spring. Students connect the dots. So we flag the transition risk when Congress moved to cap graduate borrowing again when ED confirmed grad plus counts toward the $257,500 lifetime limit. And again, when 23 states sued over the caps ahead of the July 1st start. Remember that one? You can go back in the archive. So listen to that podcast. Each round has pushed more students toward private graduate school loans. Every projections already point to federal loan limits nearly doubling private student loan volume in 2026. NASFA or NAF NASFA has asked ED for written clarification and had not received an official response

6:14as of August 14th. Barbers and financial aid professionals should be watching for an updated FAQ or a dear colleague letter and for whether ED reconciles the credit-hour instruction with the time-based language still sitting in the final rule. That is our show for today. A quick hitter, a lot of information jammed in there, but you can find all the links and resources to dive deeper on this topic and more at thecollegeinvestor.com. Find us on social media, ask questions and all the things you can see us at the college investor. Type those words in. You'll find us. Thanks again for stopping by today and we'll talk to you again real soon.