- With the Grad PLUS program for new loans expiring after July 1, 2026, new federal caps ($20,500 for graduate students and $50,000 for professional students) may create large gaps in high-cost programs.
- Lenders are reluctant to expand lending because they lack data on borrower credit quality, program-level repayment risk, and the stability of student income streams.
- Colleges are considering risk sharing, operational changes and partnerships with employers or industry groups as they prepare for an uncertain first few years.
Starting in 2026, Grad PLUS loans will end, and there will be new borrowing options for higher and career education. The new borrowing limits ($20,500 annually for graduate students and $50,000 for students in specified professional programs) represent a sharp departure from the previous model, which allowed borrowing up to the full cost of attendance.
The line between “graduate” and “professional” is now tied to detailed federal definitions and CIP codes, putting programs such as physical therapy, occupational therapy, physician assistant studies, speech-language pathology, and social work below the graduate minimum despite tuition that often exceeds $40,000 annually.
With these changes taking effect, the second transformation is now underway: Private lenders are not willing to replace what Grad PLUS once provided. Hesitation is rooted in uncertainty about risk, credit, and the behavioral response of students and institutions.
Lenders face a market they cannot yet model
We’ve spoken with several private lenders about the changes coming in 2026. The most consistent message from lenders considering new graduate loan products is simple: They have no data.
Under the current system, schools can see how much their students are borrowing but have no visibility into their credit scores, income, or other indicators of financial health. In turn, lenders receive no track record of how students from certain programs have performed historically because the federal government has assumed almost all of the risk for graduate borrowers.
while There is some dataIt is difficult to convert it into a model for every program.
Instead of federal underwriting, lenders will need to forecast repayment outcomes for each individual program. But without previous years’ data, any early forecasts are just guesswork.
The result is widespread caution, and none of the lenders we spoke to appeared willing to offer broad, open-ended loans to graduate programs. Many are exploring:
- Co-signing requirementswhich may vary not only by school but by program.
- Program pricingreflecting the earnings potential and attrition risk of each grade.
- Whether income from aid will be countedwhich helps some borrowers but is seen as unreliable and temporary.
- Risk sharingWith schools absorbing part of the risk of default or non-payment. However, lenders emphasized that the need for risk sharing may vary across programs within the same institution (and schools generally do not want this).
The lack of borrower credit data as well as program outcomes data shapes all of these choices. Until lenders understand who is applying, who is eligible, and who is paying, they will not be able to price risk with confidence.
Likely outcome for the first several years: a Mixture of loan structuresThe wide variation in interest rates, and the large differences from lender to lender – even for the same program and the same school.
Colleges are very concerned about the future
The schools are also in unfamiliar territory. For many institutions, especially those with high-cost graduate health programs classified under the lower borrowing cap, the new structure creates immediate gaps.
The most controversial question is whether schools will get involved risk sharing – Agreeing to bear some of the financial risk if their students default on private loans. Most schools are currently against this idea. But privately, many college administrators acknowledged that if enrollment declined sharply because students were unable to qualify for private loans, resistance might weaken.
Some schools have considered taking out institutional loans, but few have capital large enough to replace Grad PLUS folders. Others are exploring Employer partnershipsThe organization finances a portion of the tuition fees in exchange for a commitment to work after graduation. These arrangements are similar to military service agreements or ROTC-style service agreements and can be attractive in fields facing persistent workforce shortages.
Industry groups are also exploring their own version of shared responsibility. It is not clear what form such a structure might take, but the fact that associations are considering it indicates how destructive the new border could be.
Income-sharing agreements have largely fallen out of favor, and most schools do not see them as viable. Private lenders have hinted at exploring income-based repayment structures, but none appear ready to announce a concrete product.
Registration questions are still on everything
More important is not knowing how students will respond. The reality is that there will be a group of students who will not qualify for any type of private loans and will not enroll in a graduate program.
Programs whose tuition and fees exceed the federal maximum may face a sharp decline in enrollment if students fail to qualify for private graduate loans. Even robust programs may experience fluctuations as lenders experiment with underwriting models during the first few years.
If enrollment declines too much, colleges may face difficult choices: cut costs, close programs, consider risk-sharing, or face complete closure.
For lenders, student behavior also poses risks. A significant decline in enrollment may put students in the current program at risk – having to deal with transfers and changes may alter payment profiles. Without seeing these patterns, lenders remain cautious.
How can future students prepare?
Borrowers entering the programs after July 1, 2026, will face a more complex and fragmented lending environment. Steps to consider:
- Select the CIP code for your program To find out whether it falls within the graduate or professional limit.
- Request a full cost of attendance forecastAnd not just tuition fees.
- We expect private lending standards to vary widely – Lenders may offer different terms for the same program. You’ll need to get 3-5 quotes and compare your options.
- Ask schools whether there are plans to establish partnerships with employers or risk-sharing arrangements.
A common theme among lenders and schools is uncertainty. Until the data accumulates, the new graduate financing market will be a moving target.
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