Graduate students are facing an entirely new student loan landscape post-July 1, 2026. Due to new borrowing rules in the One Big Beautiful Bill Act (OBBBA), the Grad PLUS loan program has been eliminated for new borrowers, and there are new caps for Direct unsubsidized loans for graduate students. These changes could create funding gaps for some graduate students, especially those attending high-cost programs. Here’s a closer look at which graduate students may be affected the most, along with alternative options for paying for school.
How OBBBA Has Changed Graduate Student Borrowing
New OBBBA rules have significantly changed the federal student loan system, especially for graduate students planning to enroll in 2026-27 and beyond.
Elimination of Grad PLUS Loans
One of the biggest changes is the elimination of the Grad PLUS loan program. Since 2006, graduate students could borrow up to their cost of attendance in Grad PLUS loans, minus any other financial aid they already received.
You could use Grad PLUS loans to cover anything related to your cost of attendance, including tuition, fees, housing, food, and supplies. This made Grad PLUS loans especially useful to students attending expensive graduate programs.
To date, about 1.9 million students hold a collective $124.7 billion in Grad PLUS loans.
New Annual Borrowing Limits
Direct unsubsidized loans are still available to graduate students, but they have new borrowing limits, which depend on the type of program you’re attending:
- Graduate programs: $20,500 annual limit and $100,000 aggregate limit
- Professional programs: $50,000 annual limit and $200,000 aggregate limit
- $257,500 overall federal borrowing cap, including undergraduate loans
Previously, the limit for Direct unsubsidized loans was $20,500 per year with a lifetime limit of $138,500 for all graduate students. Now, the Department of Education distinguishes between general graduate programs and professional programs.
Here’s the list of programs that fall into the professional category:
- Clinical Psychology (Psy.D. or Ph.D.)
- Chiropractic (DC or DCM)
- Dentistry (D.D.S. or D.M.D.)
- Law (L.L.B. or J.D.)
- Medicine (M.D.)
- Optometry (O.D.)
- Osteopathic Medicine (D.O.)
- Pharmacy (Pharm.D.)
- Podiatry (D.P.M, D.P., or Pod.D.)
- Theology (M.Div. or M.H.L.)
- Veterinary Medicine (D.V.M.)
All other programs are considered graduate programs and subject to the lower caps, including traditionally expensive ones like MBA and nurse practitioner programs.
Which Borrowers Qualify Under the Legacy Rules?
If you’ve already borrowed student loans for graduate school, don’t panic nothing has changed for you just yet. Existing borrowers can continue using the old rules for three more years or until their program ends, whichever comes first.
That applies to both Grad PLUS loan and Direct unsubsidized loan borrowers who took out loans prior to July 1, 2026. However, you could lose this legacy status if you transfer schools, change your degree program, or take a semester off.
Which Graduate Students May Face the Largest Funding Gaps?
Some graduate students may find the new loan caps fall short of their cost of attendance. Here are some students who may face the biggest affordability challenges under the new federal student loan rules.
Medical Students
The U.S. has the most expensive medical schools in the world, leading to a borrowing rate of 71% among medical school students. Here are the average costs of medical school, according to the Association of American Medical Colleges (AAMC).
| Median Four-Year Cost of Attendance | Cap on Direct Unsubsidized Loans | Potential Funding Gap | |
|---|---|---|---|
| Public Medical School | $297,745 | $200,000 | $97,745 |
| Private Medical School | $408,150 | $200,000 | $208,150 |
Prior to July 1, nearly half of medical students borrowed Grad PLUS loans to cover costs, but future students will no longer have that option.
Your maximum amount of Direct unsubsidized loans may also be lower than $200,000 if you already took out federal loans for your undergraduate education due to the aggregate borrowing limit of $257,500. If you already borrowed more than $57,500 as a college student, you’ll be limited to less than $200,000 for medical school.
It’s worth noting that more than half of medical school students take out more than $200,000 to pay for their education. According to the AAMC, 56% owe $200,000 or more, 23% owe $300,000 or more, and the median student debt among the Class of 2025 was $215,000.
Dental Students
Students going to dental school may also find that federal student loans can’t fully cover their cost of attendance. Here’s the average cost for four years of dental school, according to the American Dental Association (ADA).
| Average Four-Year Cost of Attendance | Cap on Direct Unsubsidized Loans | Potential Funding Gap | |
|---|---|---|---|
| Public Medical School | $205,019 | $200,000 | $5,019 |
| Private Medical School | $335,536 | $200,000 | $135,536 |
According to the Education Data Initiative, dental school borrowers graduated with an average loan amount of $297,800, a significantly higher amount than what’s available to new students moving forward.
Veterinary Students
Veterinary school also tends to come with a high price tag, ranging anywhere from $180,000 to more than $400,000, according to the VIN Foundation. That suggests a funding gap of $200,000 or more for students attending pricier programs. Currently, more than 80% of veterinary students rely on student loans to pay for their education.
Law Students at High-Cost Schools
Law students attending public universities may be able to cover costs in full with federal student loans, as the average costs are $165,854 for in-state students. However, average costs at a private law school average $236,235, which could leave a funding gap of $36,235.
MBA Students at Elite Business Schools
MBA programs fall into the graduate program category, rather than the professional program one. That means MBA students are subject to lower federal student loan limits of $20,000 per year with a total limit of $100,000.
Some expensive MBA programs far exceed this cost. According to the Graduate Management Admission Council, two years at prestigious MBA programs like Wharton, Harvard Business School, and the MIT Sloan School of Management may cost between $157,400 and $184,560 in tuition and fees alone.
That suggests a funding gap between $57,400 and $84,560, or higher if you’ve already borrowed federal student loans as an undergraduate.
Students in Expensive Graduate Programs
Anyone whose program falls into the graduate, rather than professional, category will be subject to a lifetime cap of $100,000, down from the $138,500 limit that existed prior to July 1, 2026. Some programs may have high costs but not qualify for higher loan limits, like nurse practitioner, physical therapy, or STEM programs.
Other Factors That Could Increase Your Funding Gap
Along with tuition and fees, there are a few other factors that could increase your funding gap as a graduate student:
- Prior undergraduate borrowing: Any federal student loans you already borrowed as an undergraduate will be subtracted from OBBBA’s overall borrowing cap of $257,500. So if you already took out loans for college, you may have significantly less available to you for graduate school.
- Location of your school: The cost of living varies quite a bit by location. If you’re attending school in a high-cost city, your cost of attendance could be higher due to pricey rents, food, and transportation.
- Attending a private or out-of-state university: Private and out-of-state public schools tend to have significantly higher costs than in-state public schools.
- Taking extra time to complete your program: You may need more time to finish your degree, but your federal loan limits won’t change to account for increased tuition and living expenses.
- Enrolling part-time: If you’re attending school part-time, you’ll have lower loan limits that are prorated based on your enrollment status.
Ways to Cover a Graduate School Funding Gap
With the new OBBBA loan limits and elimination of Grad PLUS, many graduate students may be looking to other sources to pay for their degree. Here are some alternative options you can explore.
Grants and Scholarships
Both grants and scholarships are a form of gift aid, so you don’t have to pay them back. Search for opportunities online, with your school, or with an organization relevant to your degree. While these awards can be competitive, applying early and often is worth it. You may earn grant or scholarship money that could significantly reduce your cost of attendance.
Assistantships, Fellowships, or a Part-Time Job
Some graduate programs offer teaching or research assistantships or fellowships that offer help with tuition or a stipend. You’ll also gain valuable experience in your field and grow your network, which could help with your post-graduation job search.
Other options include work-study, which is available to students with financial need, or a part-time job to earn income. If you can balance work with your studies, you can earn some income to cover living expenses and supplies.
Employer Tuition Assistance Programs
Some students choose to work before attending graduate school to gain professional experience and potentially qualify for tuition assistance from their employer. If this avenue makes sense for you, look for companies that offer tuition reimbursement to employees.
Service-Based Funding Programs
Some programs can help you pay for school or pay back your student loans after you graduate. Those who serve in the military, for example, can get 100% of their tuition and fees covered in an eligible medical program through the Health Professions Scholarship Program. Many states also offer student loan repayment assistance for qualifying professionals who work in shortage or high-need areas.
Savings
Some students may spend time working and saving before enrolling in graduate school to defray costs. Families may also rely on 529 plans, investment accounts that offer tax advantages if you spend your savings on qualified education expenses.
Private Student Loans
If federal student loans and other financing options fall short, you could fill a funding gap with private student loans. Many lenders let you borrow up to your full cost of attendance, minus any financial aid you already received.
Unlike federal student loans, private loans are generally credit-based. You’ll need sufficient credit (or a creditworthy cosigner) to get approved. Your interest rate will also largely depend on your financial profile.
Private student loans are not eligible for federal programs like income-driven repayment or Public Service Loan Forgiveness. Some lenders offer flexibility though, such as lengthy repayment terms or extended grace periods.
College Ave, for example, offers medical and veterinary school loans that you can defer during residency and law school loans that you can defer during clerkships. Comparing interest rates, terms, and other features can help you find the best loan for your needs.
Financing Graduate School After OBBBA
OBBBA made some of the most major changes to the federal student loan system in decades, and graduate students may feel the biggest impact. If you’re attending a high-cost program like medical, dental, law, or MBA school, you may encounter a funding gap after maxing out your eligibility for federal student loans.
Some students may turn to private student loans to fill the gap, but make sure to pursue other funding sources before you borrow, such as grants, scholarships, or employer reimbursement benefits. You may also want to carefully consider program costs before you enroll to make sure the program’s outcome will be worth the investment.
With new federal loan limits and no more Grad PLUS loans, it’s more important than ever to compare program costs closely before committing to a graduate program.
