Key insights
- Changes to federal graduate student loan access, particularly the loss of Grad PLUS loans and new borrowing limits, are expected to push students towards private loans. This shift could increase reliance on private lenders with potentially higher interest rates and stricter credit requirements, impacting future income potential and educational access for graduate students. The long-term effect on tuition costs and the overall graduate education landscape remains uncertain, but it signals a tightening credit environment for a significant demographic.
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Many graduate students will have to turn to private loans in the wake of federal changes, and lenders are getting creative with their requirements to bridge the gap.
Under the "One Big, Beautiful Bill Act," new graduate students will lose access to Grad PLUS loans starting in the 2026-27 academic year. Graduate students can still take out unsubsidized federal loans, but how much they can borrow depends on their field of study.
"Professional" students, such as those in medicine, dentistry, and law, can borrow up to $50,000 per year and $200,000 in total. Students in every other graduate program—fine arts, nursing, physician assisting, and the rest—face a $20,500 annual limit and a $100,000 total limit.
Previously, graduate students could borrow PLUS loans to cover the remaining cost of attendance. The new loan limits are expected to create a funding gap for medical and other students in high-cost graduate programs starting this coming academic year.
The Department of Education argues that the new limits will force colleges to lower tuition. Critics of the changes disagree, arguing the caps will instead push graduate students to take out private loans or skip graduate school altogether.
While private loans can fill the funding gap, they don't offer the protections or potential inclusion in forgiveness programs that federal loans do.
Graduate students borrow about three times as much as undergraduates.1 That makes them more vulnerable to stricter limits on federal student loans and more likely to shift to private loans, which offer no federal protections and often have higher interest rates.
The biggest problem for many students in accessing private loans is the credit checks. Applicants for Grad PLUS loans are screened for an adverse credit history—delinquent debts, a recent bankruptcy, a foreclosure—but the government doesn't check their credit scores or income.2
A March report from the advocacy group Protect Borrowers and the progressive Century Foundation found that about 40% of Americans wouldn't meet the credit-score or income requirements for most private student loans. Pell Grant recipients, who are generally lower-income, fare worse: about 61% would be shut out.3
"The research shows that a pivot toward more reliance on private student loans will lock lower-income students out of higher education altogether, and it's going to have disproportionately negative impacts on students of color," said Jennifer Zhang, a policy researcher and data analyst at Protect Borrowers.
That's why many private lenders are loosening their requirements and shifting to outcomes-based loans.
Loan America, a private student lender, markets its loans to graduate students who will face a gap once Grad PLUS ends. When approving an applicant, Loan America considers both the applicant's credit score and the program's record of student outcomes, including graduation and future employment rates.4
Ascent, another private student loan lender, is also offering graduate loans based on a student's future earning potential, along with their credit score.5
"If you don't have good credit or don't have enough income, we're going to predict based on your school and your discipline, what your earnings potential is," said Ken Ruggiero, cofounder and CEO of Ascent. "If your earnings potential can afford to pay back the loans we give you...then we're going to make that loan based on a future expectation."
Ruggiero also expects other student loan lenders to follow with outcomes-based lending as more graduate students hit the new loan limits.
Nonprofit lenders are adopting outcomes-based loans, too, with many aimed at medical students, who borrow the most but also tend to outearn other graduates.
The Connecticut Higher Education Supplemental Loan Authority (CHESLA), a nonprofit lender created by the state, rolled out an outcomes-based loan for graduate borrowers in programs with high expected earnings, including business, health, engineering, and law.6
CHESLA will soon get $30 million from Connecticut to extend its loans to all graduate and professional programs.7 The support enables CHESLA to offer a graduate loan program for all nonprofessional and professional graduate students, aimed at addressing the Grad PLUS gap, said Josh Hurlock, the lender's deputy director.
But he was candid about its limits.
"We're well aware it's not going to fill the gap in its entirety, because with the Grad PLUS loan, there was basically no underwriting criteria," Hurlock said. "But we're trying to fill as much of the financing gap as we can."
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