New Graduate Student Loan Restrictions May Encourage Schools to Lower Tuition

Stricter loan limits for graduate students will likely encourage schools to lower tuition costs, but additional efforts will be required to ensure that all potential students can afford a master’s or doctoral degree, a recent report from the Consumer Bankers Association suggests.

Starting in the 2026-27 academic year, the PLUS loan program will be eliminated for all new graduate students. Previously, students in a graduate program could borrow enough through the Grad PLUS program to cover the total cost of their degree.

The previous limit on Grad PLUS loans contributed to rising graduate tuition costs, the Department of Education says. In the 2011-2012 academic year, in-state tuition and fees for the average graduate program were $19,637, according to the National Center for Education Statistics. A decade later, those costs had risen $876 when adjusted for inflation, the most recent data showed.

Graduate students will still be able to borrow federal unsubsidized student loans, with a maximum of $200,000 across their entire graduate education. This new cap, however, is lower than what students were able to borrow through the Grad PLUS loan program

“These new caps will compel colleges and universities to prioritize students, and incentivize institutions to reduce tuition and fees, making higher education more affordable and preventing students from being burdened with unmanageable debt after graduation,“ the Department of Education said in a press release.

Will Eliminating Grad PLUS Loans Really Lower Tuition?

After the Grad PLUS program was introduced in 2006, graduate student tuition costs rose significantly, according to the National Bureau of Economic Research. Now that the loan program has been eliminated, most institutions will lower tuition prices to reflect the stricter loan limits, Consumer Bankers Association researchers say.

In the beginning, institutions will likely expand student aid, such as grants or tuition reductions, to help. More needs to be done, however, to ensure the student loan changes won’t reduce accessibility to graduate schools.

One approach, for example, would rely on state governments to offer grants or student loans for programs that address critical state needs, such as funding teacher training in states facing educator shortages. Similarly, CBA researchers recommend that states expand loan forgiveness for graduates who will work in essential positions.

Some Students Will Need Further Access to Private Student Loans

The elimination of Grad PLUS loans will leave many graduate students, particularly medical students, with a coverage gap, since their tuition costs are significantly higher than those of other graduate students.

Previously, Grad PLUS loans could cover the full cost of tuition. But now “professional” graduate students, which includes medical students, have an aggregate limit of $200,000 on unsubsidized loans. The average cost for a medical degree is about $232,100, according to the National Center for Education Statistics.

That means the average medical student will need to find a way to cover more than $30,000 in education costs, and many may need to take out a private student loan. Along with encouraging institutions to lower tuition costs, the federal government will also need to ensure that private lenders expand access to loans for graduate students, researchers at CBA said.

For example, private lenders typically have prerequisites, such as a credit score of 660 or more or a co-signer. Researchers at CBA estimate that almost 14% of graduate students will have a poor credit score and/or lack access to a co-signer. For larger loan amounts, some graduate students will need to provide proof that they will likely earn between $60,000 and $80,000 upon graduation.