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Congress’s plan would limit how much graduate students can borrow, which access advocates say could shut many out of further education.
Among the many major changes to federal financial aid policy in Congress’s budget reconciliation bill, one could have an underreported but outsize effect on both college finances and educational equity: new limits on federal loans for graduate students.
The Senate version of the reconciliation bill, which President Donald Trump has urged Congress to pass as early as next week, would cap professional degree loans at $200,000 and all other graduate loans at $100,000. Both the House and the Senate also proposed completely eliminating Grad PLUS, an unsubsidized federal loan with no borrowing limit that has helped students from modest backgrounds pay for graduate degrees since 2006.
In the two decades since Grad PLUS was implemented, the number of Americans with a postgraduate degree has doubled, according to 2021 Census data. Robert Kelchen, a professor of educational leadership and policy studies at the University of Tennessee at Knoxville, said federal investments in graduate loans—in particular the provision that students could borrow unlimited amounts—led to a “big expansion” in graduate programs.
“First there were more students who suddenly had access to graduate programs, and so enrollment went up,” he said. “That encouraged colleges to start new programs to meet the market demand.”
Proponents of the loan program argue that growth is a sign of its success in expanding access; its critics say it’s because colleges saw an opportunity to boost enrollment in highly profitable programs.
Federal graduate loans can be used for any postgraduate degree, including Ph.D.s. But master’s degrees and professional degrees, such as those in law and medicine, tend to be far more expensive. Graduate students also have much less access than undergraduates to institutional and public aid, meaning low- and middle-class students almost always have to borrow.
Kelchen said students could turn to private lenders, but the benefit of federal loans is that they don’t take personal credit into account. They also don’t currently factor in a student’s chosen degree program or its projected earnings outcomes, the latter of which the Republican bill would make relevant.
If that happens, low-income students with poor family and personal credit could be left with no pathway to a postgraduate degree. And some graduate programs that funnel workers into high-need sectors, like social work and teaching, could see applicant shortages worsen.
‘Cash Cows’ to Slaughter
Some universities, Kelchen said, rely heavily on their graduate programs for tuition revenue—particularly large private institutions such as New York University and the University of Southern California, both of which enroll more graduate than undergraduate students. For some smaller universities that have struggled to maintain undergraduate enrollment, including Simmons University in Boston and Nova Southeastern in Florida, boosting graduate program offerings has become a key revenue stream.
Republican lawmakers who support restricting federal graduate loans argue that their availability has incentivized colleges to hike graduate tuition rates and overenroll programs with poor earnings outcomes for students.
Kelchen has conducted studies examining the relationship between federal loans and tuition rates at business, medical and law schools, and he found that access to the former had no impact on the latter. But others have found a correlation: A 2023 study led by researchers at Vanderbilt, Columbia and Brigham Young Universities used data from Texas graduate programs and found that for every additional dollar a graduate student borrowed from the federal government, their university raised tuition by 64 cents.
Conservatives aren’t the only ones skeptical of the current graduate loan system. Sandy Baum, a nonresident senior fellow at the liberal-leaning Urban Institute and a longtime scholar of student debt, believes that unlimited loans have enabled more students to borrow heavily to pay for degrees whose economic returns are often dubious. Graduate students make up about 15 percent of all higher education enrollment in the U.S. but account for nearly 40 percent of all outstanding student debt, according to a 2020 report from the Congressional Budget Office.
“A lot of institutions started master’s degree programs as cash cows, and it wouldn’t be so bad if they became less profitable,” Baum said. “People have always exaggerated the extent to which aid for undergraduate students has led to tuition increases, and that evidence seems very weak outside the for-profit sector. But for graduate programs, I think there’s absolutely evidence that it’s contributed to the increase in high-cost degrees.”
Baum said the current “infinite borrowing” policy is “not optimal” if it encourages students to go into hundreds of thousands of dollars of debt to get a master’s in a field like creative writing or environmental studies.
“There are lots of master’s degrees programs that just don’t pay off very well. If we narrow access to some of those programs, that’s not so terrible in my opinion,” she said. “You want people to think more carefully about their choices, but you don’t want poor students to not be able to become doctors … so the question becomes, what are the appropriate limits?”
Putting Degrees Out of Reach
The University of New England, a private nonprofit institution in Maine, is home to the only medical college in the state. For the past decade, applications to its College of Osteopathic Medicine have surged and enrollment has grown steadily. The university increased its incoming class size from 165 to 200 this year and just finished constructing a new training facility.
According to university data, 87 percent of UNE medical students and 94 percent of dental students use federal loans to fund their education.
UNE president James Herbert said he’s not concerned that loan caps will cause enrollment to drop; admission, he said, is extremely competitive. But he is worried that the applicant pool will shrink—and become whiter and wealthier—if the proposed $200,000 cap on federal loans for professional schools passes.
At UNE, medical school tuition is currently inching toward $70,000 a year, or about $280,000 for the usual four-year run. That’s roughly the national average for medical schools and doesn’t include fees or living costs, which graduate students often use loans to pay for.
Herbert said that for private colleges like his, where programs are funded almost entirely by tuition, capping federal loans at the level proposed by Congress would cut off access for many students.
“At first glance, maybe $200,000 seems like a good enough cap. But running a medical school, especially for an independent college, is extremely expensive,” he said. “Unlike undergraduate financial aid and Pell Grants, policymakers and most people in general don’t really understand the role that graduate loans play in making that education possible and affordable.”
For students who still choose to attend, Herbert said forcing them to turn to private lenders could have downstream consequences for primary medical care in high-need areas. With repayment a pressing concern, students could increasingly turn to specialty care, which is more lucrative and available to fewer patients.
Herbert isn’t the only one worried about that impact. Bruce Scott, president of the American Medical Association, wrote in a statement earlier this month that the proposed loan cap, combined with plans to limit eligibility for the Public Service Loan Forgiveness program, would “worsen a growing physician workforce shortage that is already making it difficult for people to access timely care.”
Similar challenges could arise for lawyers, who might be incentivized to work at big law firms with six-figure salaries in order to pay off debt rather than in public defenders’ offices or legal organizations that serve poor communities.
For students partway through a medical or law degree who rely on federal loans, the caps could mean the end of their education if they can’t qualify for a private loan—or could force them to borrow from shady lenders at high interest rates in order to avoid leaving their program with a lot of debt and no degree.
Eliminating the Grad PLUS loan would also relieve the graduate lending market of one of its main competitors. Ken Ferreira, president of the Eastern Association of Student Financial Aid Administrators, said he worried that could lead to higher interest rates and more aggressive repayment policies.
“If you take the federal government out of the equation, it leaves the market wide-open,” he said.
