- Beginning in July 2026, a new federal law will cap the amount graduate students can borrow, ending the long-standing ability to finance the entire cost of attendance with federal loans.
- Roughly one in three recent college graduate borrowers would have exceeded the new limits under current borrowing patterns, according to a new analysis from the Federal Reserve.
- Nearly 40 percent of these high-balance borrowers may have difficulty qualifying for private loans without a cosigner, raising concerns about access to college education.
When Congress passed the One Big Beautiful Bill Act, it changed a central feature of the way college education is financed in the United States. For nearly two decades, federal policy allowed graduate students to borrow up to the full cost of attendance through the Graduate PLUS loan program. That option ends in June 2026.
A new one report from the Federal Reserve Bank of Philadelphia’s Consumer Finance Institute (PDF file) provides one of the clearest pictures yet of what that change could mean for students, families and lenders.
The analysis shows that millions of prospective students may face a new funding gap – and private lenders may be unwilling or unwilling to fill the gap.
Changes to Federal Graduate Loans
Under the new law, graduate students will be limited to $20,500 per year and $100,000 total in federal loans. Students in professional programs such as law and medicine will have higher limits ($50,000 per year and $200,000 total) but even those ceilings are well below what many borrowers currently assume.
There is also controversy over what counts as graduate school versus professional school.
Using de-identified credit bureau data, combined with graduate enrollment data, the researchers examined borrowing patterns among students who attended graduate school between 2015 and 2024. The findings suggest that the new caps will be binding for a significant portion of borrowers if past trends continue.
About 28 percent of all federal graduate borrowers borrowed more than the new annual limits. For professional courses, the share was even higher: well over one-third of federal borrowers exceeds what will soon be permitted. Doctoral programs also showed high exposure, with approx four in ten borrowers exceeding the new thresholds.
Even in master’s programs (where borrowing is typically lower due to shorter programs), almost one in four federal borrowers would have required additional financing in addition to the new ceilings.
How big is the financing gap?
For students reaching the new cutoffs, the gap is not trivial. The report estimates that borrowers who exceed the limits will need an average of around 1.25 euros $21,700 per year in additional funding to continue their programs.
That figure varies by institution type and degree. Master’s students at public institutions roughly need this $15,500 per yearwhile those at non-profit private schools would come closer $23,600. In doctoral and professional programs, the average differences are often larger $25,000 per yearespecially in private non-profit institutions.
The size of these gaps matters because federal student loans include fixed interest rates, income-driven repayment options, and student loan forgiveness programs. This is especially important in areas such as education, social work and health sciences. Replacing federal dollars with private student loans could significantly increase costs and financial risk for students.
Private loans are not an easy alternative
One of the central questions of the report is whether private lenders can realistically intervene. Historically, they have played only a limited role in financing university education while students were still enrolled. Our own conversations with private lenders have shown that private lenders generally will not be able to fill the entire gap.
Among the graduate students who studied, 43 percent used federal loansbut alone 4 percent depended on private loans during registration. Even among those who borrowed privately, most did so from a cosigner. More than half of private borrowers someone else had covered the loan.
Credit profiles help explain why. About 38 percent of graduate students in the sample had either no credit score or a score lower than 670 – a common threshold for qualifying for private student loans without a cosigner. About 13 percent also met the federal government’s standard for an “adverse credit history,” which private lenders generally consider a minimum screening rather than a target.
These patterns are becoming more concerning among students who have borrowed above the new federal limits. Almost four in ten of these borrowers have a high balance had weak or non-existent credit histories, making it unlikely that they would qualify for private loans on their own.
The risk is even greater at for-profit institutions. Although fewer students at those schools borrowed above the limits, approx 60 percent of those who did had subprime or non-existent credit scores.
What this means for future graduate students
For students planning graduate school after 2026, the report’s findings point to several immediate realities.
First, many students who previously relied entirely on federal loans will need to arrange additional financing well in advance of enrollment. That could mean improving credit scores, finding a co-signer, or rethinking programs altogether.
Second, there will likely be private loans for graduate school (if available for your program). higher interest rates and less protection than federal loans. Students who experience income volatility after graduation may find it more difficult to manage these conditions.
Third, concerns about access may be most acute for students from less privileged backgrounds, students with limited credit histories, and students whose families cannot provide financial support.
The report warns that these students could be disproportionately deterred from university education as funding options decline.
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