Private Student Loan Volume Jumps as Federal Caps Take Effect, and Democrats Promise Education Department Hearings

Private student lending is booming. The numbers arrived just as Washington's balance of power flipped.

SoFi reported in late October that student loan originations hit $2.9 billion in the third quarter, nearly double the year before. Days earlier, Sallie Mae, which controls more than half of the private student loan market, said graduate loans were up 119% year over year.

What the caps do

The One Big Beautiful Bill Act cut what new graduate students can borrow from the federal government. Programs designated as professional degrees are capped at $200,000. Other graduate programs are capped at $100,000. Before, graduate students could borrow up to the full cost of their degree.

New borrowers also face a lifetime cap of $257,500, and there are new limits on how much parents can borrow for their children's schooling.

Jordan Matsudaira, director of the Postsecondary Education & Economics Research Center at American University, estimates that once the changes are fully phased in, more than half a million borrowers will need to find an extra $20,000 a year somewhere other than the federal program. His center's analysis found the hardest hit are students in expensive programs like medicine, law and dentistry, and in high-cost states.

The administration's case

The Trump administration says the caps will curb "excessive borrowing" and force colleges to look at their own prices. It describes uncapped federal lending as a driver of soaring tuition.

There is some early evidence on that front. Since the caps took effect, at least 40 schools have cut the price of at least some programs, according to the conservative American Enterprise Institute.

Critics answer that most colleges cannot afford to lower tuition. They also worry the changes will put new hurdles in front of students from poor families.

Students caught in the gap

Chloe Frabotta, 25, started a physician assistant program in New York City this fall. Until weeks before classes began, it was unclear whether her program would count as "professional," with the higher loan limit.

She took roughly $6,000 in federal loans for her first trimester and covered the rest with private loans cosigned by her mother. "At least in my circles a lot of people were like, 'I guess that's what I'm going to have to do, and I'm going to try to make it work,'" she said.

Federal loans offer more flexible repayment, possible forgiveness after 10 years of public service and, for many borrowers, lower interest rates. Private loans often require a cosigner or a strong credit profile. Another 25-year-old borrower, Darian Bogie, was turned down by several private lenders before finding financing.

The last-minute uncertainty over which programs qualified as professional is a process failure, and it landed on students already committed to enrolling.

The repayment overhaul and the servicing problem

Separate from the caps, the Education Department rolled out a sweeping repayment overhaul in July. Borrowers have reported confusion and errors, including inaccurate billing and stalled debt relief.

Since Trump took office, the department has cut staff and reduced its oversight of loan servicers. It was the Government Accountability Office that revealed the department had stopped monitoring servicers for call quality and accuracy.

An Education Department spokesperson said the administration has "unlocked new, affordable higher education pathways for millions of American students." The spokesperson said department functions "can be delivered by other federal agency experts while more decision-making authority can be returned to parents, states, and local communities."

Democrats move to investigate

Democrats won both the House and the Senate on Tuesday, and oversight of the administration's education moves is on their priority list.

Sen. Ed Markey of Massachusetts said at a press conference before the election: "We're going to begin to have the hearings." He added that "Linda McMahon will sit there under oath beginning to answer questions about what is going on at this department because it is hurting right now millions of people across this country. They should just get prepared."

Aaron Ament, president of the borrower advocacy and legal group Student Defense, expects oversight "ramped up pretty quickly." He points to the transfer of millions of borrowers into new repayment plans with higher bills, the restart of involuntary collections on defaulted loans, and the weaker supervision of servicers. Hearings would likely come first, he said. Subpoenas for department documents, along with probes by the Inspector General and the GAO, could follow.

Student Defense has also published an oversight "curriculum" for lawmakers. It covers predatory colleges, mismanaged loan forgiveness programs, and failures in moving borrowers to new repayment plans.

Conservatives see the shift differently. In National Review, an education-policy writer argues that the new Democratic majorities leave the administration "stuck on the defensive" for two years. The writer says the majorities will block new initiatives, threaten existing ones and "impose potentially crippling oversight." The piece credits the administration with nearly halving the department's bureaucracy, a faster FAFSA launch than under Biden, and a new federal tax credit for scholarship-granting organizations. It also credits the administration with a provision requiring programs to show a sound return on investment for graduates.

What to watch

No hearing dates or subpoenas have been announced. The oversight agenda Ament's group laid out centers on servicing, collections and repayment plans. Markey's remarks center on McMahon's testimony. Neither lists the new borrowing caps as a target, even though private lenders' 2026 numbers show that is where the money is moving. Whether the first hearings examine the caps or only the department's execution will show how much of the new law Democrats intend to contest.