Student Loan Changes Take Effect: What Grad PLUS Changes Mean for Graduate Borrowers

A major change in the graduate student lending market takes effect today, July 1, as Grad PLUS loans will no longer be available to new borrowers.

For years, Grad PLUS allowed graduate and professional students to borrow up to the full cost of attendance, beyond Direct Unsubsidized loan limits. Unlike private student loans, Grad PLUS loans were issued without meaningful underwriting to assess whether borrowers could realistically repay. The previous structure weakened basic market discipline in graduate education financing, contributed to rising program costs, and left taxpayers absorbing significant losses.

The change taking effect today does not mean Grad PLUS lending disappears overnight. Existing borrowers may continue borrowing for up to three more academic years, meaning most of the roughly $15 billion in expected Grad PLUS lending for the 2026–2027 school year will still come from the federal government. But by the 2028–2029 school year, new Grad PLUS originations are expected to be a fraction of today’s volume.

Why This Student Loan Change Matters

Graduate education should be a launchpad, not a liability.

Yet the cost of graduate school has grown dramatically. The price of master’s programs has climbed 158 percent since 1993, and Americans now owe $1.83 trillion in student loans, more than 90 percent of it federal debt.

This growing debt was a natural outcome of a federal lending expansion that lacked attention to cost, value, and repayment outcomes. Students could borrow large sums based on a school’s stated cost of attendance, even when the degree program’s expected earnings made repayment difficult.

Today’s changes should encourage students to ask harder questions and think about the expected return on their degree before borrowing, schools to rethink pricing, and policymakers to focus on better data, transparency, and accountability.

The Role of Private Student Lenders

The Consumer Bankers Association's (CBA) recent white paper estimates that private lenders could underwrite roughly 75 percent of prospective borrowers who otherwise would have used Grad PLUS, absent further reforms or anticipated market and behavioral changes.

That does not mean the private market is a one-for-one replacement for the federal program. Private student loans are not subsidized by taxpayers and are priced and structured differently. They involve underwriting, risk assessment, and repayment considerations that Grad PLUS largely did not. That discipline is important, but it also means some students may not receive the same amount of credit or at the same cost they could previously access through the federal government.

That is not a flaw in the system. In many cases, it is the system working as intended: protecting students from taking on debt they may not be able to repay.

Still, gaps remain. Schools, states, and policymakers all have a role to play in ensuring students can access valuable graduate education without reimposing unsustainable federal debt burdens. Many schools and universities are already re-examining if and how to adjust costs for different programs. Closing remaining those gaps requires improving the completeness of student loan data, better earnings data at the program level, clearer rules for using that data in underwriting, and steps by institutions and states — including grants and tuition reductions — to serve students the private market cannot reach.

What Students Should Ask Before Borrowing

As the market adjusts, students considering graduate or professional programs should start with the basics:

What will the degree cost? What are graduates of the program likely to earn? How often do borrowers from that program repay their loans successfully? And does the expected value of the degree justify the debt?

They are the questions that should sit at the center of every borrowing decision. The point was underscored recently by Washington Post personal finance columnist Michelle Singletary, whose video “A college degree isn’t worth decades of debt” warned students and families to weigh the value of higher education against the long-term burden of debt.

As CBA President and CEO Lindsey Johnson wrote earlier this year:

“The changes coming are intended to inject market-driven solutions and discipline where to date there has been little if any. That reality means students must be more discerning, schools must rethink pricing, and families should ask hard questions about the value of each degree program. The result is a renewed need for a broader conversation, for borrowers and lenders alike, on the value of education: What will the degree cost? What is the expected earnings potential? And how likely is repayment?”

What Comes Next

CBA has been focused on the transition away from Grad PLUS and what it means for students, lenders, schools, and policymakers. Earlier this year, CBA released a white paper outlining how the private market can support borrowers, where gaps remain, and what additional steps are needed to improve the graduate student lending market. CBA’s recommendations include improving federal data availability, providing fair-lending clarity around the responsible use of program-level data, and encouraging states and schools to address affordability directly.

The Bottom Line

July 1 marks an important shift in federal student lending. Done right, the move away from Grad PLUS can help restore cost discipline, protect borrowers from excessive debt, and create a more transparent, accountable graduate education financing system.

Dive Deeper

• To read CBA’s full white paper on forthcoming changes to the student lending market and how we are advocating for further changes to help fill the gaps in student lending, click HERE.
• To read CBA President and CEO Lindsey Johnson’s U.S. News & World Report op-ed on graduate student lending reform, click HERE.