With Grad PLUS loans ending in July and new limits on other federal student loan borrowing, more students may have to rethink their graduate school payment strategy. Many will rely more on private student loans, while some may have to look for less expensive programs or seek alternative sources of funding.
Here’s what you need to know about how graduate school borrowing is changing.
[Read: Best Private Student Loans.]
The End of Limitless Federal Borrowing
Typically, borrowing begins with Federal Direct Unsubsidized Loans, for which graduate students will still be eligible. “However, these have annual and lifetime limits that may preclude students from borrowing up to the cost of attendance, even with the higher limits for professional degrees, like law or medicine,” says Amanda Elliott, CSU Global’s associate director of financial aid and student finance advising.
The new Federal graduate loan ceiling for the 2026-2027 year will be an annual $20,500, and a $100,000 lifetime limit. For select professional programs like law and medicine, the limit increases to $50,000 per year and $200,000 lifetime. It’s worth noting that the aggregate limits will not include any undergraduate borrowing; previous aggregate caps combined undergraduate and graduate federal student loans.
On top of the new loan limits, the other popular federal loan program — Grad PLUS loans — is being eliminated on July 1, 2026.
“For the last 20 years, most students who have needed additional funding have gone with Grad PLUS loans,” says Robert Kelchen, professor and head of the Department of Educational Leadership and Policy Studies at the University of Tennessee.
Those loans were appealing, Kelchen says, because of their federal benefits like comparable rates, income-based repayment and approval without a cosigner.
In addition, Grad PLUS loans let students borrow up to the full cost of attendance, so many borrowers were able to fully fund grad school without wading into private student loans. “With that benefit gone, graduate students may need to use multiple funding options to obtain the same level of funding the Grad PLUS previously offered,” says Elliott.
It’s important to note that current Grad PLUS loan borrowers are unaffected. “The legacy provision allows any students who borrowed before June 30, 2026, to continue borrowing Grad PLUS loans under the current rules,” says Elliott. “This gives these students three more years of Grad PLUS loan eligibility or until they have completed their program, whichever comes first.”
[Read: Best Student Loan Refinance Lenders.]
Potential Outcomes of Limited Funding
According to Brookings research, new graduate loan limits will affect roughly 25% to 40% of graduate borrowers, especially those in longer or higher-cost master’s, professional programs or health-related programs.
In other words, a significant number of students will experience unmet financial need, says Kelly Shultz, financial specialist at HelloCollege, a college admissions consultancy. “For that subset of borrowers, the closest alternative will be private loans, but others will respond by attending cheaper programs or getting more employer support.”
Limited funding options could even impact whether students choose to attend grad school, or perhaps influence a change in career trajectory. For example, there’s been some debate as to why certain high-cost programs like advanced nursing and physician assistant studies are not designated as ‘professional’ and granted the higher loan limits.
“There is already pressure in congress to expand the list of programs that have higher loan limits,” Kelchen says, “but so far it hasn’t gone anywhere.”
Could the New Rules Create Positive Change?
Eliminating Grad PLUS loans will alleviate high student debt levels and rising tuition costs, says Elliott. “Congress stated that the hope is that colleges and universities will rethink future price hikes, knowing that many prospective students simply cannot afford their programs.”
Considering that the average federal Grad PLUS outstanding balance as of the third quarter of 2025 was $66,222, putting guardrails on borrowing may act as a course correction to help future borrowers take on less debt. The risk, however, is that if schools continue to raise tuition while students’ borrowing power is lessened, it may put graduate programs out of reach for lower-income or credit-challenged students.
Less Loan Access Could Make Students More Selective
Graduate schools, like undergraduate programs, have a wide range of tuition costs. “Affordability and return-on-investment will factor much more prominently into students’ decisions about which programs to pursue,” says Shultz.
This can be a good thing for their future finances. For example, more prospective students may be inclined to ask whether it’s possible to complete a program without utilizing private loans.
“We would expect this to drive demand towards lower-cost institutions and programs, part-time or work-grounded pathways, and careers with clearer earnings prospects,” says Shultz.
[Read: Best Student Loans for Graduate School]
Can Private Loans Bridge the Gap?
For graduate students who max out their federal loan limits but still need additional funds to pay for their program, many will have to rely on private student loans — which can be more challenging.
The key issue is that private loans are credit-based, often requiring a cosigner. “Borrowing to finance graduate school will be much more tied to family finances going forward,” Shultz says.
How to Make Private Loans Work for You
Because private student loans can have higher interest rates and fewer protections, it’s important for students to do their research before borrowing. “Before committing to any program or loans, students should carefully weigh whether the earning potential post-degree is enough to justify the total debt they’ll take on to get there,” Elliott says.
If you do end up using private loans, it’s a good idea to get a head start by making interest payments while you’re still in school if you can manage it.
Other Ways to Supplement Grad School
Besides private student loans, grad students can explore school-based aid such as scholarships, grants, fellowships or teaching/research assistance, says Elliott. “Borrowers should also look into employer tuition assistance to see if their companies will help fund further education,” she adds.
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The ‘Borrow Less’ Era: How New Federal Limits Could Change Grad School Choices originally appeared on usnews.com
