Key Takeaways
- The Grad PLUS program will be sunset starting in the 2026-2027 school year. At the same time, some graduate students will see the amount they can borrow at the federal level reduced.
- Before taking out loans, graduate students should explore grants and scholarships, as well as opportunities to work for their school and federal tax breaks. If those options are exhausted, state-based and private lenders provide alternative options to federal student loans.
Starting with the 2026-2027 school year, graduate students will no longer have access to a key federal loan program to help them pay for their education, and many will need to find other options to finance their graduate degrees.
The “One Big, Beautiful Bill” has reduced the amount of loans students and their families have access to for all kinds of education costs.
Many graduate students will be affected, since the legislation eliminates their ability to take out Grad PLUS loans. In the 2024-25 award year, about 545,000 graduate students had a PLUS loan.
Who Is Affected
Students who have taken out a Grad PLUS loan before July 1, 2026, can still borrow PLUS loans for up to three more years, or until their program ends.
Additionally, starting in the 2026-27 academic year, non-professional graduate students will be limited to borrowing up to $100,000. Professional graduate students, including those studying medicine and law, can borrow a maximum of $200,000 in unsubsidized loans throughout their educational career.
Why This Matters
Limited access to federal loans for graduate students might force them to take out more expensive loans, with unfavorable interest rates or terms. That could leave them with debt for many years and could lead them to become delinquent or default on their loans, ultimately harming their personal finances for years to come.
These new limits replace the previous $138,500 cap, which applied to all graduate students. This new limit for non-professional graduate students is unlikely to impact many, since the average non-professional graduate student holds $80,550 in student debt after adjusting for inflation, according to the National Center for Education Statistics.
However, it may leave a coverage gap for professional graduate students, since many would have used the now-defunct Grad PLUS loan program to cover the remaining balance of their education. Medical students, whose degree costs on average $232,100, will find it especially challenging to finance their education.
“More of them are going to have to turn to the private sector and to look for either other types of loan programs or, better yet, for additional grant or scholarship funding,” said Gail daMota, president of the Education Finance Council, a trade association representing nonprofit and state-based student loan organizations.
However, there are steps graduate students can take before they get a private loan to cover the gap. And if they must take out another loan to pay for their graduate studies, there are strategies to help navigate that landscape.
Before You Take Out Loans
Before taking out federal or non-federal loans, experts recommend exploring scholarships and grants from institutions, state and federal governments, and third-party organizations.
Graduate students also typically have employment options at their university, working as research or teaching assistants. In fact, those types of jobs can lead to more grants and scholarships, such as funding from the federal work-study program.
If a graduate student is working for a company instead, they should check if their employer has a tuition reimbursement program, daMota said. Students can receive up to $5,250 of employer-provided education assistance tax-free, which can be used toward books and supplies, tuition and fees, and student loan payments.
Additionally, the Lifetime Learning Credit is available to single taxpayers with an income of less than $90,000 and to those who file jointly with an income of less than $180,000. This tax credit allows undergraduate and graduate students to subtract a maximum of $2,000 of education expenses annually from their taxes.
If You Must Take Out Loans
If a graduate student still can’t afford their tuition after exhausting all available grants, scholarships, and federal loans, private student loans can be a viable option. However, students should always be cautious about what kind of loan they are taking out.
When considering non-federal student loans, daMota suggests starting with state and nonprofit lenders. These types of loans typically use tax-exempt financing, known as qualified student loan bonds.
State and nonprofit lenders who use these bonds must set the interest rate for student loans at no more than 2 percentage points above the yield on the bonds. This is similar to how federal student loan interest rates are determined, and typically results in lower rates than those of private loans.
“Many of the non-profits and state-based organizations also manage the 529 plans and the scholarship programs for the state,” daMota said. “By reaching out to those organizations, the student can also perhaps find some free financial assistance, reducing their need for student loans.”
For-profit private student loan lenders can also be helpful for many graduate students, but borrowers need to understand the details of their loans, experts said. The most important thing is to confirm the loan interest rate before committing to a loan with the lender.
In some cases, private student loans can be more flexible than state or federally backed loans and may offer lower interest rates than Grad PLUS loans, said Bethany Hubert, a college lending and financial aid specialist at Going Merry, a branch of Earnest, a private student loan lender. State lenders may also be restricted by location and can only lend money to students who are going to school in-state.
“[Private student loans] can offer competitive interest rates, no fees, and flexible repayment options designed for borrowers still in school or early in their careers,” Hubert said.