SoFi and Sallie Mae report surge in private student loan originations

Private student lending volumes have doubled in the past year as federal borrowing limits force graduate students to seek alternative financing. SoFi reported $2.9 billion in student loan originations for the third quarter in late October, nearly twice the amount from the previous year. Sallie Mae, which holds more than half of the private student loan market, reported that graduate loans rose 119% year-over-year.

The shift follows the implementation of new caps under President Donald Trump’s “Big Beautiful Bill.” The legislation limits professional degree programs to $200,000 in federal loans and other graduate programs to $100,000. Previously, graduate students could borrow up to the full cost of their degrees. For new borrowers, an overall lifetime borrowing cap is set at $257,500.

Jordan Matsudaira, director of the Postsecondary Education and Economics Research Center at American University, estimates that more than half a million borrowers will need to find an extra $20,000 annually outside the federal program. His analysis indicates that students in medicine, law, and dentistry face the greatest financial strain.

The Trump administration argues the caps will curb excessive borrowing and force schools to review costs. The American Enterprise Institute notes that at least 40 schools have reduced program costs since the rules took effect. Critics, however, argue most colleges cannot lower tuition and worry the changes will disadvantage students from low-income families.

Students are finding various ways to cover the gap. Chloe Frabotta, a 25-year-old physician assistant student in New York City, borrowed $6,000 in federal loans for her first trimester. She secured private loans for the remainder, with her mother as a cosigner. Darian Bogie, a 25-year-old dental student at Howard University, was denied by several private lenders. He raised approximately $76,000 through a crowdfunding campaign for his first year of school.

Institutions are also adapting. South Carolina Student Loan reported a 400% increase in graduate student borrowing this year. The University of Kansas School of Law began issuing its own loans, approving eight so far. Steven Freedman, associate dean of admissions, stated that private banks now have significant say in who can afford law school.

A legal dispute over which programs qualify as professional degrees extended until just before the new rules took effect. A federal judge blocked part of the rule, allowing nursing and physical therapy students to access higher federal loan limits temporarily. Jon Witter, CEO of Sallie Mae, said the uncertainty delayed financial aid packages and pushed peak lending into October.

Robert Harrington, dean of Weill Cornell Medicine, said the school received many calls from confused families. His institution is worried the new costs will make programs accessible only to those with family wealth. Marc Schoonover, general manager of lender ELFI, noted that while private lending is up, the number of students who cannot find any financing option is smaller than initially feared.