The End of Grad PLUS Loans: A New Era for Graduate Student Financing

Grad PLUS loans have been around for nearly two decades to help fund the education of students who are pursuing a graduate degree such as medical school, law school, dental school, business school, and many more. Many of these graduate programs can be very expensive and students use Grad PLUS loans to pay for education expenses that exceed the annual Direct Unsubsidized Loan limits for graduate students.

That is about to change.

The One Big Beautiful Bill Act (OBBBA) effectively repeals the federal Grad PLUS loan program for new graduate and professional students beginning July 1, 2026. What does this mean for graduate and professional students? This change is one of the most significant for graduate and professional student financing in recent history and will likely alter how graduate and professional students are able to pay for their education.

What Are Grad PLUS Loans?

Grad PLUS loans are federal student loans that are available to graduate and professional students. Unlike Direct Unsubsidized Loans for graduate students which have established annual borrowing limits, Grad PLUS loans allow graduate and professional students to borrow up to the full cost of attendance at their school minus any other financial aid for which they have registered (such as Direct Unsubsidized Loans or other assistance).

Grad PLUS loans have enabled many graduate students to afford their high-cost education by filling the gaps between their cost of attendance and the amount of other financial aid for which they are eligible. This includes many students attending medical school, law school and dental school, among other graduate programs. What Is Changing?

Beginning July 1, 2026, new graduate and professional students will no longer be able to borrow Grad PLUS loans.

In place of Grad PLUS loans, new graduate students will be able to take out Direct Unsubsidized Loans, and be limited by the federal borrowing caps as established by OBBBA.

The new framework includes:

Elimination of Grad PLUS loans for new borrowers Annual borrowing limits for graduate students Lifetime borrowing caps on federal loans New restrictions on repayment options

In the case of existing borrowers, they may still be able to receive Graduate PLUS loans for a few years provided they are continuing in the same program under which they were first approved for a Graduate PLUS loan. In this case, they would be subject to the terms and conditions of the legacy provisions of Graduate PLUS loans for that time. Why Was the Change Made?

The supporters of this legislation say that unlimited federal borrowing has driven up the cost of higher education leading to increased tuition and student debt.

By limiting the amount of federal loans that can be given to students, Congress hopes to force colleges and universities to spend their funds more wisely and cut costs to prevent them from having to rely so heavily on debt financing to fund students’ educations.

On the other hand, opponents argue that removing Grad PLUS loans will put a significant roadblock before students seeking to further their education with advanced degrees and that this will be particularly difficult for low-income and middle-income students.

Who Will Be Most Affected? Medical Students

Medical school tuition and living expenses often exceed the federal unsubsidized loan limits. This is why many medical students have historically relied on Grad PLUS loans to finance the majority of their education.

Without Grad PLUS loans, future physicians may need to seek private loans or alternative funding sources.Law Students

The impact on current law students will be dramatic as law school costs have continued to climb at law schools across the country. Students attending private law schools and those from lower- and middle-income backgrounds who are attending law school at schools located in very expensive cities will find that, under the new borrowing limits, they will face very significant funding shortfalls.

Dental and Veterinary Students

High tuitions and living costs for professional programs (other than medical school) with tuitions of over $100,000 per year could become very expensive for students relying on federal student aid for their funding such programs.

Master's Degree Students

Other Graduate Students

Other students who are seeking to earn Master’s degrees in programs such as MBA, public health, social work, counseling, etc. could face similar challenges as those listed above if the costs of their program exceed the federal loan limits.

Will Current Students Lose Access?

Not necessarily.

A provision will be included in the legislation to protect currently enrolled students who borrow federal loans prior to July 2026 and continuously are enrolled in the same program from which they borrowed. Students should check with their school’s financial aid office to determine whether they would qualify for continued access to Grad PLUS loans under such circumstances.

What Alternatives Will Students Have?

As Grad PLUS loans disappear, students will have to rely on a combination of funding sources to pay for their graduate education, such as private education loans, alternative funding sources, and other types of financial aid. Scholarships and Grants

Merit aid and need-based aid that an institution can offer to a student to reduce their borrowing requirements.

Employer Tuition Assistance

Many employers today offer tuition reimbursement or other forms of educational assistance for graduate level studies.

Assistantships and Fellowships

Graduate assistantships, teaching assistantships, and research fellowships can be used to pay some or all of the student’s tuition and living expenses.

Private Student Loans

Even when funding is available through federal loans, students are increasingly turning to private student loans to finance their education. This is because private loans have in the past required a stronger credit profile than federal loans and because, as with other forms of consumer debt, private student loans often lack the same borrower protections as federal loans. Students and their families are also increasingly relying on personal savings and family contributions to finance part of a graduate student’s education.

Students will increasingly rely on personal savings or funds from family members to cover some or all of the costs to attend graduate school.

What Students Should Do Now

Are planning to attend graduate or professional school, or are already in school and planning for future educational expenses? In light of the recently enacted education law, planning ahead for the costs of graduate or professional school is now more important than ever.

Prospective students should:

Find out the total cost of attending your desired graduate or professional program. Understand upcoming federal borrowing limits. Explore scholarship and fellowship opportunities early. Compare financing options before enrollment. Finally, find out from the financial aid office of the particular program you are looking at how the federal loan policy changes will affect that program. The Bottom Line

Elimination of Grad PLUS loans redefines the way graduate and professional education will be paid for in the United States. The efforts of the supporter of this legislation are to prevent students from taking on too much debt while trying to find a way to keep tuition under control. However, in doing so, they may actually be pricing many students out of attending graduate or professional school.

As the July 2026 implementation date for the new federal borrowing limits approaches, it is critical that prospective graduate students begin to plan for the financing of their graduate or professional school education, keeping in mind how the new rules may impact their specific program.

Financial Impact: Real Numbers for Medical and Professional Students

Understanding the concrete financial impact of Grad PLUS elimination requires looking at actual costs. According to the Association of American Medical Colleges (AAMC), the median cost of attendance for medical students at private medical schools in 2023-2024 was approximately $310,000 for four years, while public medical school attendance costs averaged $240,000. These figures include tuition, fees, books, and living expenses.

Under current rules, graduate students can borrow up to $20,500 annually in Direct Unsubsidized Loans, which carry a 7.16 percent interest rate as of 2024. This means the annual federal loan cap covers only about 26 percent of the median private medical school cost of attendance. Grad PLUS loans have historically filled this gap, allowing students to borrow the remaining $17,000 to $18,000+ per year with a current interest rate of 8.16 percent.

Starting in 2026, the new borrowing framework will impose annual caps that are significantly lower than current Grad PLUS lending. While exact annual limits under OBBBA are still being finalized by the Department of Education, early guidance suggests medical students may face annual federal borrowing restrictions around $12,000 to $15,000 above the base Direct Unsubsidized amount, creating a funding gap of $5,000 to $8,000 per year for many students.

For a medical student graduating in 2030 after four years of school, this funding gap could total $20,000 to $32,000 in unmet need that would have previously been covered by Grad PLUS loans. When multiplied across the estimated 20,000+ medical students entering school each year, this represents a significant shift in how medical education financing works at the federal level. Private lenders will likely capture much of this demand, though private loans typically require creditworthiness screening and offer less favorable terms than federal loans. Use the free MedDebt Calculator to model your specific loan situation, compare PSLF vs. refinancing vs. aggressive payoff side by side, and see your projected net worth over time. No signup required.

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Disclaimer: This article is for informational purposes only and does not constitute financial, legal, or tax advice. Every borrower's situation is unique. Before making any loan repayment or refinancing decision, consider consulting a certified student loan advisor or fee-only financial planner.

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