What the End of Grad PLUS Federal Loans Could Mean for Higher Education Policy and the Workforce

Artem: Under the new changes, the Grad PLUS program has been discontinued. This means the federal government will no longer issue new Grad PLUS loans. In its place, they’ve implemented new limits on federal graduate borrowing: $20,500 per year, up to $100,000 in aggregate, for standard graduate programs, and $50,000 per year, up to $200,000 in aggregate, for what are being designated as “professional” programs.

Exactly what counts as a professional program is still a bit in flux due to ongoing litigation, but essentially it’s meant to cover fields like medicine, law and several critical specialties, such as clinical psychology and other healthcare-related specialties. The professional program designation for purposes of federal loan limits will not vary by institution and state; it will be designated nationwide by the US Education Department. 

So essentially, students who used to rely on Grad PLUS will now either need to choose different programs or find alternative sources of financing. There are some private loans available to graduate students, but those depend on credit and often require a cosigner. Some institutions have started offering their own loan programs, and some states have stepped in to try to fill the gap. Direct loans remain the most straightforward federal borrowing path, but the new limits will constrain students who need financing beyond that.

Artem: That will partly depend on how the “professional” designation is applied, and on the extent to which states, institutions and professional/industry groups step in to fill the gap left by the federal government. But there could certainly be issues in some health-care fields — especially those whose costs exceed the professional-program limits, or that aren’t designated as “professional” at all.

For example, under the initial rules, nursing was not designated a professional program, even though the cost of nursing education can be substantial. That’s concerning because nursing has been flagged repeatedly in our research as one of the critical occupations with ongoing shortage concerns. Other health fields could be affected as well. Legal fields could be affected, and some social work specialties may be at risk.

A lot is still unknown, but if students are worried they won’t be able to secure the financing they need, they may steer away from certain fields — for example, away from public health, or public-interest legal careers like becoming a prosecutor or public defender, because they can no longer rely as heavily on things like Public Service Loan Forgiveness. Instead, they’ll have to rely on private, state, or other financing under stricter conditions, and that will shape which fields people end up going into.

It’s hard to say right now, because we don’t yet know to what extent states and institutions will step in to close the gap, or how much programs themselves will adjust. It’s something to monitor, to make sure funding is available, particularly in areas facing the greatest supply shortages.

Artem: The changes are intended, in part, to prevent graduate students from taking on unreasonably high debt. As I mentioned, Grad PLUS had no limit beyond the cost of attendance. Part of the concern is that students might take on more debt than they can later repay, which can have other financial consequences, like damaged credit.

It’s also intended to incentivize institutions to curb rising tuition, and thereby help limit the growing cost of graduate education. To what extent that actually happens remains to be seen, but there is some suggestive evidence that after the Grad PLUS program began in 2006, tuition costs rose. However, it’s debatable how much of that increase the program actually caused. At the same time, there isn’t strong evidence that the program meaningfully expanded access the way policymakers had hoped when it was first created.

There’s also the issue of protecting taxpayers: when students take on debt they can’t repay and apply for forgiveness, taxpayers ultimately absorb those unpaid amounts. So the reasoning is also about preventing excessive debt, limiting the cost to taxpayers from loan forgiveness and pushing both students and institutions to be more cost-conscious. This is not necessarily to make programs cheaper outright, but to slow how fast costs grow.

Artem: It’s hard to say, but given how much Grad PLUS borrowing has grown, some kind of policy intervention was probably coming regardless. Grad PLUS loans had grown to account for nearly a third of all graduate loans, and graduate loans overall had grown to represent a substantial share of total federal lending. Given that trajectory, policymakers were likely going to act at some point, and Grad PLUS in particular was targeted because of its unlimited borrowing capacity.

That said, Grad PLUS wasn’t used by a huge number of students overall. Only around 16% of graduate students took out Grad PLUS loans. However, that borrowing was concentrated in more expensive programs and more expensive private, non-profit institutions. This has been discussed for several years; there were other policy options on the table, but this is the approach the federal government ultimately went with.

Artem: In 2024, we published research looking into graduate education. We found that while graduate degrees are associated with the highest earnings and most favorable employment outcomes among education options, the growing debt associated with these programs has increased the financial risk to borrowers. Inflation-adjusted median earnings for graduate degree holders have increased only about 12% over the past three decades, while net tuition and fees have more than tripled since 2000. Graduate loans accounted for nearly half of all federal student loan disbursements and Grad PLUS loans accounted for a third of graduate loan disbursements.

That said, our recommendations didn’t go as far as this policy did. Low-income students and students from historically underrepresented backgrounds tend to rely more heavily on Grad PLUS and its broader loan availability, and without it, they’re more likely to turn to private financing, ultimately losing federal borrower protections in the process.

So rather than a one-size-fits-all cutoff, what we proposed was more of a program-level approach: tying access to Grad PLUS-style borrowing to a program’s outcomes. In other words, if a program provided a sufficient earnings premium over a bachelor’s degree, and demonstrated that graduates could reasonably repay their loans, we didn’t see a strong case for cutting off access. Those programs, even if expensive, tend to lead to much stronger labor-market outcomes. Medicine is a good example: it takes years and a substantial investment, but it leads to high-earning, in-demand positions.

On the other hand, if a program led graduates into jobs where you couldn’t reasonably expect high earnings, but the institution was still charging tuition as if it would, that’s where we had real concerns, and where we thought it was reasonable for the federal government to limit access to that kind of borrowing.

Artem: Some states are starting to try to fill the gap left by the federal government. Connecticut has a loan program along these lines; Minnesota also has a state graduate loan program; and there are a few other states looking to expand programs they already had in place.

It varies a lot by state. These programs tend to be tied to state residency, and some require cosigners or a certain credit rating or income level. But it’s an opportunity for states to look at which professions they specifically need more workers in, that may not be getting sufficient support from the federal government, and step in with targeted subsidies to help close that gap, including in what you might call “socially valuable” occupations, like education and social work, where graduate programs can be hard to finance given the earnings those roles typically offer. How far a state can go with that really comes down to its own spending priorities and capacity, which creates real limitations.

At the same time, states should think about attaching accountability measures to funding to make sure it goes to programs that actually set students up for success. There’s also been a proliferation of online graduate programs from various institutions, some of which may not have the same results as their in-person counterparts, and the same earnings-versus-cost question applies there too. So this is really an opportunity for states to take a more deliberate, purposeful approach to graduate education policy.

States are only just beginning to develop responses, not just for graduate education, but in general, since these new federal rules only recently took effect. This new regulatory environment will give us an opportunity, over the coming years, to see which states end up handling it best.