6 trends we're watching after the end of Grad PLUS

After months of discussion and debate, the graduate lending provisions included in the One Big Beautiful Bill (OBBB) took effect on July 1. The changes eliminated Grad PLUS loans and introduced new federal borrowing caps of $100,000 for graduate degrees and $200,000 for professional degrees. 

With July 1 behind us, the market’s response to the end of Grad PLUS is beginning to take shape. Here’s what we’re seeing so far and the trends our Financial Aid Optimization team will continue to monitor in the months ahead.

1. Legal challenges against the Department of Education continue

Although the One Big Beautiful Bill has become law, legal challenges continue over the new graduate borrowing limits and the Department of Education’s definition of professional degree programs. A coalition of 25 states and Washington, D.C. has sued the Department, and several nursing and healthcare associations have also filed charges. So far, none of these lawsuits have delayed implementation of OBBB.

However, the court recently granted an injunction related to the definition of professional programs. In response, the Department of Education expanded the list of programs that qualify for the higher loan amounts. The case won’t be decided on until at least December, so institutions must decide whether to allow for expanded loans in the newly designated programs and risk students not being able to borrow in the spring or hold off and risk enrollment declines.

2. Private financing is moving into focus 

As Grad PLUS ends, private lenders are becoming a more prominent financing option for grad students. But more students relying on private loans exacerbates questions about affordability, eligibility, interest rates, credit requirements, and access to borrower protections. 

Not every student will qualify for private financing, and those who do may face higher rates or need a co-signer. This creates new enrollment risk for programs that have historically relied on Grad PLUS to help students cover tuition. Importantly, for all students, this creates a level of friction that didn’t exist before, and that may cause a student to rethink their enrollment plans. If you haven’t already, identify which programs rely most heavily on Grad PLUS and estimate how many incoming students could face financing gaps.

3. Unclear implementation guidance continues to create challenges

A few months ago, most institutions were focused on understanding the policy itself. Our partners have been asking about grandfathering, software readiness, how aid is packaged and shared, and a whole host of operational questions. 

Now, university leaders are tasked not only with sorting through complex federal guidance, but also understanding how these changes are impacting their students, programs, and their finances, including questions like: which student populations are most vulnerable? Which programs are most exposed to financial risk? What pricing or aid adjustments might be necessary?

4. Schools are offering deep discounts to offset loan changes 

Speaking of pricing and aid changes: We’re starting to see programs offer aggressive discounting or scholarships to offset the affordability challenges posed by the end of Grad PLUS. Several top MBA programs are discounting tuition by as much as 40 to 50%. Santa Clara University School of Law, for example, is offering a new $16,000 guaranteed annual scholarship for incoming full-time JD students. 

Santa Clara Law isn’t alone. Most of the schools I speak with are thinking about adjusting pricing or scholarships, and we’re already seeing an uptick in the number of headlines about schools adjusting their pricing and aid. Ultimately, it’s important to approach scholarships and discounts in a way that is strategic and sustainable, rather than following a knee-jerk reaction based on what your competitors might be doing.

5. States are launching loan programs to fill financing gaps

Some states are creating new loan programs designed to supplement or replace the funding that Grad PLUS loans previously provided. In Minnesota, 35 colleges and universities have signed on to the SELF Grad Loan, a low-interest option with fixed rates based on whether the loan has a co-signer and the repayment plan the student chooses. The loan offer is not based on a student’s credit score. In Connecticut, the Connecticut Higher Education Student Loan Authority (CHESLA) offers fixed loan rates as low as 5% to Connecticut residents and to some students from nearby states enrolled at a Connecticut institution.

Programs like these improve affordability, but they also introduce new complexity around limits, co-signers, and access; there is now more variability in loan offerings based on where a student lives. We’re continuing to monitor whether other states, regions, or consortia will follow suit. 

6. Grad programs face new enrollment risks

As enrollment teams know, the new federal borrowing limits will likely prevent some grad students from enrolling or completing their degrees. One in three graduate students borrow more than $65,000 and are at “very high risk” under the new policies, and 51% of graduate borrowers fall outside the new borrowing thresholds. Students with lower credit scores, limited access to a co-signer, and/or higher debt will have fewer alternatives without Grad PLUS. The complexity and uncertainty around Grad PLUS, and students’ general lack of awareness of these policy changes, may also contribute to late-cycle melt. And of course, these changes are coming at a time when financial aid and enrollment teams are already strapped for time and resources. 

We’re still in the early days of the impacts of the end of Grad PLUS. As universities, state governments, professional associations, and students alike continue to feel the effects of federal policy changes and adjust accordingly, our Financial Aid Optimization team is here to help.

Brett Schraeder

Vice President, Financial Aid Optimization

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