Private Loan Originations Nearly Double

Private student loan originations reached $2.9 billion in the third quarter, nearly doubling from the same period last year, according to data released by SoFi in late October.

The surge in private borrowing follows the implementation of new federal loan caps under the Trump administration's "Big Beautiful Bill." These rules restrict the amount graduate students can borrow from the government, forcing many to seek outside funding to cover tuition and living expenses.

Sallie Mae, which controls more than half of the private student loan market, reported that graduate loan volume increased by 119% year-over-year. The company noted that peak lending season extended into October due to delays in financial aid packages caused by legal disputes over program classifications.

The new regulations impose a lifetime borrowing cap of $257,500 for new borrowers. Professional degree programs, such as medicine and law, face a federal loan cap of $200,000, while other graduate programs are limited to $100,000. Previously, graduate students could borrow up to the full cost of their degree through federal channels.

Chloe Frabotta, a 25-year-old physician assistant student in New York City, navigated this uncertainty before starting her program. She borrowed $6,000 in federal loans for her first trimester and secured private loans for the remainder of her costs, with her mother cosigning. Frabotta said the decision to use private credit was driven by anxiety over the final status of her program's loan eligibility.

Jordan Matsudaira, director of the Postsecondary Education & Economics Research Center at American University, estimated that more than half a million borrowers will need to secure an additional $20,000 per year from sources other than federal loans once the changes are fully phased in. His analysis indicates that students in high-cost fields like dentistry and law are experiencing the most severe impact.

Colleges are adjusting their financial aid strategies to address the gap. The University of Kansas School of Law has approved eight private loans so far, with more in process. Steven Freedman, the associate dean of admissions, stated that private banks now have significant influence over student access. At Lewis & Clark College in Portland, Oregon, the student aid office is seeing a rise in private loan activity and has introduced a new scholarship for students affected by the caps.

A federal judge blocked part of the administration's rule that would have classified nursing and physical therapy programs under lower loan limits. This last-minute legal intervention allowed these students to access higher federal loan amounts, though it contributed to the confusion and delays reported by schools and lenders. Sallie Mae CEO Jon Witter confirmed that the uncertainty extended the peak lending season.

Marc Schoonover, general manager of lender ELFI, said the number of students unable to find any financing option is smaller than initially predicted. However, Dr. Robert Harrington, dean of Weill Cornell Medicine, expressed concern that the new cost structures may limit access to medical training for students from families without substantial financial resources.

Darian Bogie, a dental student at Howard University, turned to crowdfunding after being denied by several private lenders. He raised approximately $76,000 to cover costs not met by federal loans, describing the process as a last resort after his father, a sanitation worker with limited credit history, could no longer pay out of pocket.