A major change to federal student aid is about to reshape how students pay for graduate school. The One Big Beautiful Bill Act (OBBBA), signed into law in July 2025, eliminates the Grad PLUS loan program and introduces strict new borrowing caps.

Starting July 1, 2026, graduate students will be limited to $20,500 per year in federal loans, while students in professional degree programs like law or medicine can borrow up to $50,000 annually. The problem? Those limits don’t come close to covering the real cost of many programs, leaving students with a big financial gap to fill. This brief examines the implications for students.

What Happens Next?

Without new grant aid or efforts to lower costs, students will have to make up the difference on their own. That could mean turning to private loans or deciding to forgo graduate school entirely.

But private loans aren’t a simple substitute. They’re harder to qualify for, can have variable rates or higher rates for less creditworthy borrowers, and don’t offer the same protections as federal loans — like income-driven repayment plans or loan forgiveness options.

Who Will Be Hit the Hardest?

These changes won’t affect everyone equally. Students from low-income backgrounds and students of color are more likely to rely on federal loans in the first place; they’re also more likely to face barriers when trying to access private credit.

That means many of the students who stand to benefit most from a graduate degree could be the ones most likely to be shut out.

Why This Matters

Graduate degrees are required for many essential, high-demand careers — think healthcare, education, and law. If fewer students can afford to pursue these paths, it could shrink the pipeline of qualified professionals and create ripple effects across state economies. Cutting off a major source of federal aid without replacing it doesn’t reduce costs; it just shifts the burden onto students. And in doing so, it risks increasing debt, pushing borrowers toward riskier options, and widening existing gaps in who can access graduate education and the opportunities that come with it.

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