Graduate students face decreased access to federal loans. Here are other financing options

Starting next academic year, graduate students will no longer have access to a major federal loan program to help them pay for their education, and many will need to find other options for financing their graduate degrees.

The “Big, Beautiful Bill” reduced the amount of loans students and their families could take out to cover all types of education costs.

Graduate students of all kinds will be affected, as the legislation eliminates their ability to obtain Grad PLUS loans. In the 2024-25 award year, approximately 545,000 graduate students received an additional loan.

Who is affected?

Students who received a Grad PLUS loan before July 1, 2026, can still borrow PLUS loans for up to three more years, or until their program ends.

Additionally, starting in the 2026-27 academic year, non-professional graduate students will be limited to borrowing up to $100,000. Professional graduate students, including those studying medicine and law, can borrow a maximum of $200,000 in unsubsidized loans throughout their educational career.

These new limits replace the previous cap of $150,000, which applied to all graduate students. This new limit for non-professional graduate students is unlikely to affect many, since the average non-professional graduate student carries $80,550 in student debt after adjusting for inflation, according to the National Center for Education Statistics.

However, it may leave a gap in coverage for professional graduate students, many of whom would have used the now-defunct Grad PLUS loan program to cover the balance of their education. Medical students, whose degrees cost an average of $232,100, will find it very difficult to finance their education.

“More of them will have to turn to the private sector and look for other types of loan programs, or better yet, get additional grant or scholarship funding,” said Jill Damota, president of the Education Finance Council, a trade association representing nonprofit and local student loan organizations.

However, there are steps graduate students can take before they take out a private loan to cover the gap. And if they have to take out another loan to pay for their graduate studies, there are strategies to help deal with this landscape.

Before you take loans

Before taking out federal or non-federal loans, experts recommend exploring scholarships and grants from foundations, state and federal governments, and third-party organizations.

Graduate students usually also have employment options at their university, where they work as research or teaching assistants. In fact, these types of jobs can lead to more grants and scholarships, such as funding from the federal work-study program.

If a graduate student works for a company instead, they should check whether their employer has a tuition reimbursement program, Damota said. Students can receive up to $5,250 in employer-provided educational assistance tax-deductible, which can be used for books, supplies, tuition, fees, and student loan payments.

Additionally, the Lifetime Learning Credit is available to single taxpayers with income under $90,000 and to those filing jointly with income under $180,000. This tax credit allows undergraduate and graduate students to deduct a maximum of $2,000 in education expenses per year from their taxes.

If you must take out loans

If a graduate student still cannot afford tuition after exhausting all available grants, scholarships, and federal loans, private student loans can be a viable option. However, students should always be careful about the type of loans they take out.

When considering non-federal student loans, Damota suggests starting with government and nonprofit lenders. These types of loans typically use tax-exempt financing, known as qualified student loan bonds.

Government and nonprofit lenders that use these bonds must set the interest rate on student loans no more than 2 percentage points above the yield on the bonds. This is similar to how interest rates are set on federal student loans, and typically results in lower rates than private loans.

“Many nonprofits and government organizations also administer 529 plans and state scholarship programs,” Damota said. “By connecting with these organizations, perhaps students can also find some free financial assistance, reducing their need for student loans.”

For-profit private student loan lenders can also be beneficial for many graduate students, but borrowers need to understand the details of their loans, experts said. The most important thing is to check the interest rate on the loan before committing to a loan with a lender.

In some cases, private student loans can be more flexible than state or federally backed loans and may offer lower interest rates than Grad PLUS loans, says Bethany Hubert, a college lending and financial aid specialist at Going Merry, a division of Earnest, a private student lending company. State lenders may also be restricted by location and can only lend money to students who attend school within the state.

“[Private student loans] “It can offer competitive interest rates, no fees, and flexible repayment options designed for borrowers who are still in school or early in their careers,” Hubert said.