Grad School Is Getting Harder To Finance: Who Can Still Afford Advanced Degrees?

Graduate school could become much harder to afford for borrowers who rely on federal student loans starting in the 2026-27 school year. Grad PLUS loans will no longer be available to new borrowers, eliminating a source of funding that could cover up to the full cost of attendance. 

Instead, they’ll be limited to the amount they can borrow through Direct Unsubsidized Loans. These changes could create significant funding gaps for students pursuing expensive professional and graduate degrees. Continuing borrowers may qualify for an exemption that allows them to continue using grad PLUS loans for three additional school years.

How much the new federal loan limits affect you depends largely on what type of graduate or professional program you choose, and the amount you would have borrowed under the old rules.

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Graduate students face new federal loan limits 

For more than 20 years, graduate students could use grad PLUS loans to borrow up to their school’s full cost of attendance, minus other financial aid received. That made them particularly useful for those pursuing expensive graduate and professional degrees, since the loans could help cover tuition, housing, books, transportation, and other living expenses.

That system is changing. Under federal student aid rules taking effect July 1, 2026, grad PLUS loans will no longer be available to new borrowers. Graduate students will still be able to take out federal Direct Unsubsidized Loans, with limits based on the type of the program type:

There will also be a new lifetime federal student loan limit of $257,500 across all Direct Loans used for undergraduate, graduate, and professional study combined. Once you reach that limit, you won’t qualify for any additional federal student loans, regardless of your financial need or your school’s cost of attendance.

See Also: Student Loan Limits 2026-27

This policy change — part of a sweeping federal tax and spending law enacted in 2025 — was partly designed to address concerns that unlimited federal lending has led to tuition inflation. 

“There was no incentive on the part of institutions to curb costs because students could borrow up to that full cost of attendance,” says Cathy Mueller, executive director of Mapping Your Future, a nonprofit helping students and families navigate college and financial aid.

Critics of the shift, however, warn that eliminating grad PLUS loans and adjusting caps on Direct Unsubsidized Loans will create affordability challenges for students, especially those pursuing high-cost degrees or without other financial resources to draw on. 

“High-cost programs, like medicine and law, will likely be most impacted, as their annual costs exceed the Direct Unsubsidized Loan limits and they have historically relied heavily on grad PLUS loans,” says Sarah Austin, policy analyst at NASFAA.

Current borrowers may qualify for a temporary exception 

Graduate students who took out federal loans before July 1, 2026, may qualify for a temporary exception to the new rules. Eligible borrowers can continue using the current federal loan system for up to three more years, or until they finish their program, whichever comes first.

That means qualifying students may still be able to borrow grad PLUS loans and access the current Direct Unsubsidized Loan limits during that period.

However, some changes could cause you to lose this protected status and become subject to the new lower borrowing caps. This could include:

• Taking a semester off
• Transferring schools
• Changing degree programs

Federal loan limits will depend on degree type 

Starting on July 1, 2026, federal borrowing limits for graduate students will depend partly on your program’s Classification of Instructional Programs (CIP) code, a system the Department of Education uses to categorize fields of study.

Under the new rules, the Department of Education will divide graduate programs into two groups: professional programs and traditional graduate programs. Your program’s classification will help determine how much you can borrow in federal Direct Unsubsidized Loans.

The standard graduate tier ($20,500/year)

Most graduate programs will fall under the lower federal borrowing tier. Under the new rules, students in these programs can borrow up to $20,500 per year in Direct Unsubsidized Loans, with a lifetime limit of $100,000. That’s down from the previous aggregate graduate loan limit of $138,500.

Some expensive graduate programs, including many MBA and nurse practitioner programs, are still classified under this standard graduate tier despite their high tuition costs. 

The professional tier ($50,000/year)

Programs that fall into the professional category will be eligible for a higher limit — $50,000 per year with an aggregate limit of $200,000. The degrees that qualify for professional degree financing are: 

• 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.)

Which graduate degrees face the largest funding gaps?

The impact of new borrowing caps will vary widely by degree program. In many high-cost graduate and professional programs, annual tuition and fees already exceed the new federal loan limits before accounting for housing, transportation,  books, and other living expenses. 

The table below compares the average annual tuition and fees of several graduate and professional degrees with the maximum federal borrowing available under the new caps. 

Keep in mind these figures reflect average annual tuition and fees, but actual costs can vary significantly by school and location. More expensive programs, particularly at private universities or in high-cost cities, could exceed the new federal borrowing caps by a much wider margin. 

What students are most affected? 

The new federal borrowing caps won’t affect every graduate student the same way. Some borrowers may have a much harder time covering their full cost of attendance, especially:

• New borrowers: Students starting graduate or professional programs on or after July 1, 2026, will be fully subject to the new loan caps and the elimination of grad PLUS loans.
• Students without financial support: Borrowers who don’t have family support, personal savings, or employer tuition assistance may face larger funding gaps if federal loans no longer cover their expenses.
• Students living in expensive areas: Graduate students attending school in high-cost cities like New York City or San Francisco may face additional pressure from housing and living costs. In some cases, the new $20,500 annual borrowing limit for standard graduate programs may not come close to covering both tuition and living expenses.

Alternative ways to pay for graduate school 

Institutional aid and scholarships

Many graduate schools offer institutional aid in various forms, including scholarships, grants, fellowships, and assistantships. Check with your financial aid office or department head about opportunities. 

You can also apply for private scholarships through nonprofits, professional associations, employers, and community organizations. While graduate scholarships tend to be more competitive and less common than undergraduate awards, they can still help reduce how much you need to borrow.

See Also: Graduate School Grants: 2026 Guide

Private student loans 

Private graduate student loans are primarily based on your credit profile, so you’ll generally need good credit or a cosigner to qualify. Some lenders, however, do offer graduate student loans without a cosigner.

Austin says NASFAA expects that more students will consider private student loans for their graduate education under the new federal student loan rules.

Private lenders may offer fixed or variable interest rates, along with repayment terms that typically range from five to 20 years. Some also have specialized loan programs tailored to certain graduate degrees, including medical school loans, MBA loans, law school loans, and STEM graduate loans.

Rates, fees, and repayment terms can vary significantly between lenders, so comparing multiple offers will help you find the most affordable option.

Employer tuition assistance

If you’re working while attending graduate school, check whether your employer offers tuition assistance or tuition reimbursement benefits. Some companies help employees pay for graduate courses or degree programs as part of their professional development benefits.

Employer tuition assistance can significantly reduce how much you need to borrow, especially if your company covers part of your tuition each semester. In some fields, employers may also help pay for degrees that directly support your current role or career path, such as MBAs, nursing programs, or technical graduate degrees.

Work-study or income from a part-time job 

Working as a graduate student may also help pay the bills, whether you pursue the federal work-study program or find your own part-time job. Work-study is available to graduate students with financial need and often connects you with a job related to your course of study. 

You'll need to submit the FAFSA to be considered for the federal work-study program. If you don't qualify or can find a better opportunity elsewhere, look for flexible work that can help you pay for rent, groceries, or other living costs while you're in school.

See Also: How To Pay for Grad School