ED Outlines Guidance on Institutional Authority to Set Program-Level Loan Limits
By Maria Carrasco, NASFAA Staff Reporter
The Department of Education (ED) on Friday released a Dear Colleague Letter (DCL) reminding institutions of their new authority, effective July 1, 2026, to establish lower annual loan limits for specific programs through the One Big Beautiful Bill Act (OBBBA).
The OBBBA includes a provision where institutions have the authority to establish lower annual loan limits for specific programs, though this authority must be consistently applied to all students enrolled in that program of study, and there is no opportunity for financial aid administrators to use professional judgment (PJ) on a case-by-case basis to increase an individual student’s loans back to the statutory maximum. Further, if institutions choose to use institutional loan limits, the institutional limit is the starting point for adjustments for less than full-time enrollment.
In the DCL, ED lists best practices institutions can take when using this authority to set lower loan limits. For example, institutions may want to establish loan limits lower than the new annual loan limits made under OBBBA for students in professional degree programs, especially for programs that may be associated with lower post-graduate earnings, or higher rates of delinquency and default.
And even for programs where OBBBA did not change the annual borrowing limits, but did create new aggregate loan limits, institutions may want to consider setting loan limits below the statutory maximums for certain programs in relation to the cost of the program, and should ensure students have a “manageable debt burden after graduation,” ED wrote.
ED encourages institutions to counsel students to borrow only what they need, noting that some institutions are proactively providing students with information about their cumulative student loan debt, including an estimate of their projected average monthly payment after graduation. These institutions have also provided a reminder to students that they may choose to reduce their future loan disbursements.
“We are committed to working with you and the broader financial aid community to maximize the new benefits available under the Act, helping borrowers limit unnecessary borrowing, and ensuring they are well positioned to successfully manage their federal student loan debt after graduation,” the letter reads.
In the DCL, ED highlighted a previous white paper from NASFAA, in which two-thirds of respondents agreed that aid administrators should have the authority to limit loans for undergraduate, graduate, or professional students.
NASFAA has previously supported institutional authority to limit loans, including for less than full-time status. However, the OBBBA version of this authority does not align with NASFAA’s recommendations, as it does not allow aid administrators to increase a student’s loan amount higher than the school’s established limit, up to the applicable statutory limit, on a case-by-case basis under PJ.
In previously submitted comments to the department, NASFAA outlined its concerns with the OBBBA provision, noting that the law mandates loan adjustments for lessthan-full-time status, whereas less-than full-time adjustments would have been at the discretion of the institution under NASFAA’s proposal
This mandate could hinder institutions from using their authority to establish lower loan limits, NASFAA wrote in its submitted comments.
“ED’s additional requirement that institutions that choose to use the authority to limit students’ loans must then apply the new mandatory adjustments for less than-full-time enrollment to the institutionally-set limit, again, without the opportunity for PJ, makes it less likely that institutions will use this new authority than if it had been designed the way NASFAA envisioned it,” NASFAA wrote.
Publication Date: 6/29/2026
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