INTRODUCTION

Historically, Grad PLUS loans have allowed graduate and professional students to finance the cost of graduate school by covering expenses such as tuition, fees, textbooks and living expenses.[1] To qualify for a Grad PLUS loan, students must pass a basic credit check which is not based on income or credit score.[2] Traditionally, these loans were limitless if they covered the school’s cost of attendance, and the federal government used the resulting revenue to fund other student aid programs.[3] At the start of the Grad PLUS program in 2006, fewer than 10% of Americans possessed a graduate degree.[4] Since then, student enrollment has increased by 9% and continues to increase each year.[5] Today, the combination of expanded access to limitless graduate loans, taxpayer-funded forgiveness programs, and an estimated 40% of graduate programs leaving students in overwhelming debt has created a problematic system for both students and taxpayers.[6]

President Donald J. Trump signed the OBBBA into law on July 4, 2025.[7] The One Big Beautiful Act (OBBBA) represents a comprehensive restructuring of federal tax regulations and is considered by some to be the largest tax cut in history for middle and working-class Americans.[8] Part of the bill addresses the graduate loan crisis mentioned above. As stated by U.S. Secretary of Education, Nicholas Kent, the OBBBA “simplif[ies] our complex student loan repayment system and better align[s] higher education with workforce needs.”[9] The Trump administration has likewise championed the OBBBA as a great remedy to the crisis, characterizing it as “a historic win for students, families and taxpayers” because it holds colleges accountable by eliminating student loan eligibility for programs that often leave students worse off than if they had never enrolled.[10] Thus, Grad PLUS loans are being eliminated as part of the federal government’s effort to move away from federal lending and instead use taxpayer money for undergraduate education and workforce training.[11]

GRADUATE LOAN RESTRICTIONS UNDER THE ACT

Beginning July 1, 2026, the Act eliminates the ability of new borrowers to fully fund their education through Grad PLUS loans.[12] This policy change will affect 61% of graduate students who rely on federal loans. Thus, although Grad PLUS loans account for only 6.8% of total outstanding student loan debt, they play a vital role for students trying to afford graduate programs.[13]

The Act not only eliminates Grad PLUS loans, but also imposes new limits on Graduate  Unsubsidized Direct Loans.[14] For professional programs, borrowers will be limited to $50,000 per year and $200,000 over a lifetime.[15] For graduate programs, the annual limit will be $20,500 and $100,000 over a lifetime.[16] For undergraduate programs, there are no changes except that undergraduate loans will count towards the new lifetime limits.[17]

Additionally, the Act will hold schools accountable for the outcomes of their programs.[18] Thus, for students to continue receiving financial aid, the institutions will have to demonstrate that their graduates are financially successful. Specifically, for graduate programs, the institute must “do no economic harm” by showing that their graduates earn more than a bachelor’s degree holder in the state.[19] This shift represents an effort by the government to ensure real financial value in higher education, and that students are receiving the valuable advanced educational degree for which they are paying.[20]

THE PUSH TO PRIVATE LENDERS

For many years, students used Grad PLUS loans to bridge a financial gap that could otherwise be filled by private lenders.[21] With the elimination of this federal aid, however, many experts fear that graduate education will be out of reach because of higher interest rates and increased debt from private lenders.[22] For example, private loans often carry interest rates as high as 18%, compared to 8.9% for Grad PLUS loans.[23] The question then becomes whether private lending can fill the void left by the elimination of Grad PLUS loans and the new loan limits.[24]

Some critics have expressed concern that private lenders will be unable to fill the financial gap created by the elimination of Grad PLUS loans.[25] These concerns are bolstered by the fact that a staggering 28% of graduate borrowers are borrowing above the new federal student loan limits that go into effect in July.[26] Additionally, of those students, 40% could potentially fail to secure private loans without a cosigner.[27]

While the shift towards private lending raises real concerns, it is supported by a legitimate policy rationale which aims to eliminate Grad PLUS loans.[28] Borrowers with Graduate PLUS loans hold $1.2 billion of the nation’s outstanding student debt.[29] This amount is likely attributed to the loans currently carrying no borrowing limits beyond total cost of attendance.[30] Additionally, critics contend the Grad PLUS program increased tuition costs for students, because net tuition prices “increased by 64 cents for every new per-student dollar of federal lender” since Grad PLUS loans were introduced.[31]

Although these changes reflect valid policy concerns, graduate and professional programs have not lowered their tuition in response.[32] Instead, financial aid offices are encouraged to develop partnerships with private lenders, enhance financial literacy programs, and advocate for policy changes to support students through the elimination of loans. Thus, the government’s goal of reducing overall student debt will likely be undermined when students are forced to turn to the unregulated private loan market to finance tens of thousands in educational costs.[33]

Ultimately, the elimination of Grad PLUS loans attempts to address the government’s valid concern that students are borrowing above a sustainable limit. However, eliminating Grad PLUS loans is unlikely to resolve these challenges unless private lenders respond by lowering interest rates. While the Act encourages greater educational value, additional steps which are greater than merely eliminating the loans are likely necessary to achieve this goal. Although the Act represents a positive step towards reducing student debt, students need more direction on how to finance their education, rather than being forced to abandon higher education – through no fault of their own – due to exorbitant costs.

[1] Christine Dickson, Grad PLUS Loan Elimination: A Turning Point in Federal Aid- and Why ACE Took a Different Path, AM. COUNCIL ON EDUC. (Oct. 29, 2025), https://ace.edu/blog/grad-plus-loan-elimination-a-turning-point-in-federal-aid-and-why-ace-took-a-different-path/.

[2] Id.

[3] Beth Akers, The Big Beautiful Fix for Graduate School Borrowing, AEI (Aug. 21, 2025), https://www.aei.org/op-eds/the-big-beautiful-fix-for-graduate-school-borrowing/.

[4] Id.

[5] Id.

[6] Id.

[7] One Big Beautiful Bill Act Updates, FEDERAL STUDENT AID (Dec. 22, 2025), https://studentaid.gov/announcements-events/big-updates.

[8] President Trump’s One Big Beautiful Bill Is Now the Law, THE WHITE HOUSE (July 4, 2025), https://www.whitehouse.gov/articles/2025/07/president-trumps-one-big-beautiful-bill-is-now-the-law/.

[9] U.S. Department of Education Concludes Negotiated Rulemaking Session to Implement the One Big Beautiful Bill Act’s Loan Provisions, U.S DEP’T OF EDUC. (Nov. 6, 2025), https://www.ed.gov/about/news/press-release/us-department-of-education-concludes-negotiated-rulemaking-session-implement-one-big-beautiful-bill-acts-loan-provisions.

[10] Id.

[11] Dickson, supra note 1

[12] What the One Big Beautiful Bill Act Means for Student Loans, UNIV. CREDIT UNION STUDENT LENDING CTR (last visited Jan. 25, 2026) https://ucu.studentchoice.org/what-the-one-big-beautiful-bill-act-means-for-student-loans/ [hereinafter Loans].

[13] Id.

[14] Key Changes to Federal Student Loans Made in the Recent One Big Beautiful Bill Act, HARVARD UNIVERSITY, https://sfs.harvard.edu/2025-changes-federal-student-loans (last visited Jan. 25, 2026).

[15] Id.

[16] Id.

[17] Id.

[18] Dickson, supra note 1.

[19] Dickson, supra note 1.

[20] Dickson, supra note 1.

[21] Ben Unglesbee, What does the end of Grad PLUS loans mean for higher ed?, HIGHER ED DIVE (Sept. 22, 2025), https://www.highereddive.com/news/end-of-grad-plus-loans-impact-higher-ed/760448/.

[22] Id.

[23] What’s the impact of ending Grad PLUS loans? THE FEED (Oct. 17, 2025), https://feed.georgetown.edu/access-affordability/whats-the-impact-of-ending-grad-plus-loans/.

[24] Unglesbee, supra note 21.

[25] Unglesbee, supra note 21.

[26] Unglesbee, supra note 21.

[27] Unglesbee, supra note 21.

[28] Dickson, supra note 1.

[29] Loans, supra note 12.

[30] Unglesbee, supra note 21.

[31] Unglesbee, supra note 21.

[32] Ascent, What the Elimination of Grad PLUS Loans Means for Graduate Schools and How to Prepare, ASCENT BLOG (Oct. 17, 2025), https://www.ascentfunding.com/blog/what-the-elimination-of-grad-plus-loans-means-for-graduate-schools-and-how-to-prepare/.

[33] Mark Huelsman & Aissa Canchola Bañez, Eliminating Grad Plus Loans Without Making Higher Education More Affordable Would Be a Disaster for Students and Borrowers, PROTECT BORROWERS (April 25, 2025), https://protectborrowers.org/eliminating-grad-plus-loans-without-making-higher-education-more-affordable-would-be-a-disaster-for-students-and-borrowers/.