Quick Answer: What happened to Grad PLUS loans?
The federal Grad PLUS loan program was eliminated for new borrowers effective July 1, 2026, under the One Big Beautiful Bill Act (signed July 4, 2025). New graduate borrowers are now limited to the Federal Direct Unsubsidized Loan: $20,500/year for most programs, $50,000/year for professional programs (law, medicine). Any costs above those limits must be covered by private loans or institutional aid. Students who already borrowed a federal Direct Loan before July 1, 2026 for their current program are grandfathered and can continue under old rules for up to three more years.
Key Takeaways for 2026–27
- Grad PLUS loans 2026: eliminated for new borrowers effective July 1, 2026 under the OBBBA.
- New federal limits: $20,500/year (grad) · $50,000/year (professional programs).
- 2026–27 Direct Unsubsidized rate: 8.07% fixed, 1.057% origination fee, no credit check.
- Legacy borrowers can continue under old rules if they had any federal Direct Loan disbursed before July 1, 2026 for their current program at the same school, for up to 3 more years.
- New repayment options for new loans: tiered Standard plan or RAP (income-driven, 1–10% of AGI, 30-year forgiveness). SAVE, PAYE, and ICR phase out by July 2028.
- PSLF trap: the new default tiered Standard plan does NOT qualify for PSLF. New borrowers pursuing PSLF must enroll in RAP.
- Private loans are now the only gap-filler for costs above federal limits. Top lenders offer fixed rates starting under 5% with no origination fees.
If you are starting graduate school in fall 2026, the financing landscape looks meaningfully different than it did a year ago. The federal Grad PLUS loan, which allowed graduate students to borrow up to the full cost of attendance, was eliminated for new borrowers on July 1, 2026. For roughly 440,000 graduate students a year who relied on it to bridge the gap between federal loan limits and actual tuition costs, according to Department of Education data, this is the most significant change to graduate school financing since the program launched in 2006.
This guide explains exactly what changed, how to determine whether you’re a new borrower or a legacy borrower, what your federal limits look like for 2026–27, how to approach private loans if you need to fill the gap, and the repayment changes that affect every graduate student borrowing federal loans this year.
What Happened to Grad PLUS Loans: The OBBBA Explained
The One Big Beautiful Bill Act (OBBBA), formally signed into law by President Trump on July 4, 2025, included the most sweeping changes to the federal student loan program in more than a decade. The key provisions for graduate students took effect on July 1, 2026, the start of the 2026–27 academic year.
The most consequential change: the Graduate PLUS Loan program was eliminated for new borrowers. Before the OBBBA, grad students could borrow up to 100% of their school-certified cost of attendance through Grad PLUS, with no annual cap. Starting July 1, 2026, that option is gone for anyone starting a new program. The gap between the Direct Unsubsidized Loan limit and actual school costs must now be covered by private loans, institutional aid, or personal funds.
Grad PLUS carried a 9.07% fixed rate plus a 4.228% origination fee as of 2025–26. Despite that cost, it provided something most private loans do not: federal income-driven repayment eligibility, Public Service Loan Forgiveness (PSLF) eligibility, and broad deferment and forbearance protections. Its elimination forces a more complex tradeoff for students who relied on those protections, particularly those heading into public service careers.
New Borrower vs. Legacy Borrower: Which Rules Apply to You
The OBBBA created two distinct categories of graduate borrowers, with different rules for each. Getting this distinction right is the most important first step before planning your 2026–27 financing.
Legacy borrowers: who qualifies and what it means
According to Department of Education guidance, you qualify as a legacy borrower (and can continue borrowing Grad PLUS under pre-OBBBA rules) if both of the following conditions are met:
- You had any federal Direct Loan (Unsubsidized or Grad PLUS) disbursed before July 1, 2026, for your current credentialed program at your current institution.
- You remain continuously enrolled in that same program at that same school.
Legacy borrowers who meet both conditions can continue borrowing Grad PLUS for up to three additional academic years (through the 2028–29 academic year at the latest), or until they complete their program, whichever comes first.
Three critical details for legacy borrowers:
- Disbursed, not certified. Per the Department of Education’s interpretation confirmed by NAICU, the trigger is a loan that was actually disbursed before July 1, 2026, not one that was certified or originated. A loan in process but not yet disbursed before that date does not qualify.
- Same program, same school. Transferring institutions, changing programs, or switching credential levels can end legacy status. Contact your financial aid office before making any academic changes.
- Proration still applies. Even legacy borrowers are subject to the OBBBA’s new enrollment proration rule: students enrolled less than full-time have their annual loan limits reduced proportionally to their enrollment intensity.
New borrowers: what the rules mean for you
Per Washington State University’s financial aid guidance (reflecting federal definitions), you are a new borrower if you had no federal student loans disbursed before July 1, 2026, or if all previously borrowed loans have been fully repaid. You are also treated as a new borrower for any program you enroll in fresh after July 1, 2026, even at the same institution, because legacy status is program-specific.
For new borrowers: Grad PLUS is not available. Your only federal borrowing option is the Federal Direct Unsubsidized Loan, subject to the new annual and lifetime limits below.
Federal Borrowing Limits for Graduate Students in 2026–27
For new borrowers in the 2026–27 academic year, the Federal Direct Unsubsidized Loan is the only federal option. The OBBBA established new annual and lifetime limits based on program type:
Program Type
Annual Limit
Lifetime Cap
2026–27 Rate
Graduate / Master’s programs
$20,500/year
$100,000
8.07% fixed
Professional programs (law, medicine, etc.)
$50,000/year
$200,000
8.07% fixed
The 8.07% rate for 2026–27 was set on May 12, 2026, based on the 10-year Treasury auction yield of 4.468%, using the statutory formula under the Higher Education Act. The origination fee remains 1.057%. No credit check is required; every enrolled graduate student qualifies regardless of credit history.
Part-time enrollment note: Under the new OBBBA proration requirement, students enrolled less than full-time have their annual limit reduced proportionally. A half-time graduate student, for example, may be eligible for approximately $10,250 rather than the full $20,500 annual limit. This applies to both new and legacy borrowers.
Lifetime limit clarification: Treatment of undergraduate borrowing toward the new graduate lifetime caps is still being clarified by the Department of Education; different institutions are currently interpreting this differently. Do not assume your full lifetime capacity without confirming your individual situation with your financial aid office, particularly if you carry significant undergraduate debt.
The gap between federal limits and actual program costs is substantial at most schools. Private law school tuition averages $55,000–$70,000 per year, according to Law School Transparency data. Many MBA programs run $60,000–$80,000 per year in tuition and fees. The $20,500 Direct Unsubsidized limit leaves a gap that previously Grad PLUS filled, and that gap now must come from elsewhere.
Repayment Changes Under the OBBBA: What New Borrowers Need to Know
The OBBBA didn’t only eliminate Grad PLUS; it also restructured federal loan repayment in ways that affect every graduate student borrowing after July 1, 2026. Understanding these changes is essential before deciding how much to borrow federally versus privately.
The two new repayment tracks for loans disbursed after July 1, 2026
According to NASFAA’s analysis of the OBBBA, borrowers who take out any new federal loan on or after July 1, 2026 will have access to only two repayment options for those loans:
- The new tiered Standard Repayment Plan: Fixed payments over 10–25 years, with the term determined by your total loan balance. This is the default if you do not actively choose otherwise.
- The Repayment Assistance Plan (RAP): The new income-driven repayment option. Payments are set at 1–10% of adjusted gross income (AGI) on a sliding scale, with a $10/month minimum. Unpaid interest is waived so your balance does not grow when your payment is below interest accrual. Remaining balances are forgiven after 30 years of qualifying payments. RAP is available starting July 1, 2026.
What’s being eliminated: SAVE, PAYE, and ICR are being phased out and will be fully eliminated by July 1, 2028, per the OBBBA’s timeline. Income-Based Repayment (IBR) is not being eliminated; it remains available, but only to borrowers who do not take out new federal loans on or after July 1, 2026. Taking out new loans after that date closes access to IBR for all your loans.
The PSLF trap new borrowers must avoid
Public Service Loan Forgiveness itself is unchanged under the OBBBA. Ten years (120 payments) of qualifying employment and qualifying payments still leads to tax-free forgiveness of remaining federal balances. But there is a critical trap for graduate students borrowing new loans in 2026–27:
The new tiered Standard Repayment Plan does not qualify for PSLF, regardless of repayment term length. According to StudentLoanSherpa’s analysis of the final repayment rules, only RAP and certain legacy IDR plans (IBR, ICR through 2028) qualify for PSLF. The default plan new borrowers are placed on, the tiered Standard plan, earns zero PSLF credit.
Graduate students who plan to pursue PSLF with new 2026–27 loans must proactively enroll in RAP when their loans enter repayment. This will not happen automatically. Staying on the default plan means years of payments that do not count toward forgiveness.
RAP’s 30-year forgiveness horizon is also significantly longer than what SAVE (20 years) and PAYE (20 years) offered. For borrowers who had expected to reach forgiveness on a shorter timeline, this is a meaningful change in the total repayment picture.
Filling the Gap: Options Above Federal Loan Limits
With Grad PLUS gone and Direct Unsubsidized caps set at $20,500 for most programs, graduate students at high-cost schools face a substantial funding gap. Here is the priority order for filling it, from least to most expensive:
- Institutional aid: fellowships, grants, and assistantships.
Teaching assistantships, research assistantships, and merit fellowships from your program should be the first source of funding beyond federal loans. Many programs are substantially more generous than their published tuition rates suggest. According to the Council of Graduate Schools, approximately 60% of full-time doctoral students receive some form of institutional funding. Ask explicitly about assistantship availability; these positions often go unfilled because students do not know to ask. - Employer tuition assistance.
If you are working while enrolled or your employer is sponsoring your enrollment, some or all costs may be covered. Ask HR directly; employer education benefits are frequently underutilized. IRS Section 127 allows employers to provide up to $5,250/year in tax-free educational assistance. - Personal savings and family contributions.
Any amount covered without borrowing reduces total interest cost and repayment burden after graduation. - Private graduate student loans.
For costs that cannot be covered through the above, private loans are now the primary option for new borrowers. They carry real tradeoffs (no PSLF eligibility, no RAP, no federal deferment protections) but for borrowers with strong credit and private-sector career plans, they can be meaningfully cheaper in total cost than the federal rate.
How to Shop for Private Graduate Loans in 2026
Private graduate loan rates for qualified borrowers currently start under 5% fixed with no origination fees, compared to the federal 8.07% rate with a 1.057% origination fee. For borrowers with strong credit heading into private-sector careers where PSLF is not a factor, the economics can favor private loans for amounts above the federal cap.
The single most important rule: compare APR, not interest rate. A loan with a 4.9% rate and no origination fee is almost always cheaper in total cost than a 4.6% loan with a 2% origination fee. APR accounts for fees and gives an accurate picture of total borrowing cost.
The second rule: sequence your applications to protect your credit score.
Step 1: Accept your full federal Direct Unsubsidized Loan first
Complete your FAFSA at StudentAid.gov and accept your full federal allocation before applying to any private lender. The federal loan requires no credit check, has a fixed rate for life, and is PSLF-eligible if you enroll in RAP. Even if you end up not needing all of it, undisbursed federal loan funds can be returned within 120 days without penalty.
Step 2: Get soft-pull rate quotes from multiple lenders simultaneously
College Ave and Earnest both allow you to check your rate with a soft credit inquiry, with no impact on your credit score. Run both at the same time. Key features to compare:
- No origination fee: top-tier graduate lenders don’t charge one
- Fixed rate option: variable rates are lower today but carry interest rate risk over a 10 to 15 year repayment window
- Grace period: Earnest offers 9 months; most lenders offer 6 months after graduation before repayment begins
- In-school deferment: ability to defer payments while enrolled
- Rate match guarantee: Earnest will match a lower rate if you find one elsewhere
- Skip-a-payment flexibility: Earnest allows one skipped payment per year after repayment begins, which matters during career transitions
Step 3: Apply to hard-pull lenders last
Sallie Mae offers some of the most competitive rates for strong-credit borrowers (starting rates with autopay are among the lowest in the market) but requires a hard credit inquiry, which temporarily affects your score. Once you have your soft-pull offers from College Ave and Earnest and know your rate range, you can make an informed decision about whether applying to Sallie Mae is worth the additional inquiry. Never start with the hard pull.
Step 4: Compare all offers by APR and total repayment cost
Before signing anything, line up every offer side by side: APR, fees, repayment term options, grace period, and total estimated cost over your expected repayment timeline. Total cost, not monthly payment or interest rate, is the number that tells you what borrowing actually costs.
How Your Career Path Should Shape the Federal vs. Private Decision
The right balance between federal and private borrowing depends more on your post-graduation career path than on current interest rates. Here is how to frame the decision:
If you are heading into public service, government, education, or a qualifying nonprofit: Federal Direct Unsubsidized Loans should anchor your borrowing. PSLF forgives remaining federal loan balances tax-free after 10 years of qualifying employment and payments, a benefit that the Congressional Budget Office has estimated averages over $60,000 in loan forgiveness per PSLF recipient. Private loans are completely ineligible for PSLF. Every dollar borrowed privately is a dollar that won’t be forgiven, regardless of how long you work in public service. For new 2026–27 borrowers, enrolling in RAP at repayment is required to earn PSLF credit.
If you are heading into private industry (finance, consulting, tech, healthcare private practice): The math often favors private loans for the gap above federal limits. Private fixed rates starting under 5% with no origination fees can be meaningfully cheaper in total cost than the 8.07% federal rate over a 10–15 year repayment horizon. Refinancing private loans after graduation, once your income and creditworthiness are established, may reduce the rate further.
If your post-graduation income is uncertain: RAP’s income-sensitive payments (capped at 1–10% of AGI) provide real protection against repayment stress in years when income is low. That flexibility has dollar value that a rate comparison alone doesn’t capture. The tradeoff is RAP’s 30-year forgiveness timeline, which is longer than most borrowers anticipated under prior IDR plans.
Six Questions to Answer Before You Borrow
1. Am I a new borrower or a legacy borrower under the OBBBA? Confirm this with your financial aid office before assuming what you can borrow. The rules are different and the financial impact is significant.
2. What is my total program cost, and how much do I actually need to borrow? Know the complete number: tuition, fees, living expenses, and books. The federal loan maximum is not a borrowing target. Borrow what you need, not what you can.
3. Am I heading into a career that qualifies for PSLF? Government employees, public school teachers, employees of qualifying 501(c)(3) nonprofits, and several other categories qualify. If yes, protect your federal loan borrowing, avoid private loans where possible, and enroll in RAP when repayment begins, not the default tiered Standard plan.
4. What does my projected debt-to-income ratio look like after graduation? A widely used benchmark: total student loan debt at graduation should not exceed your expected first-year salary. Exceeding that ratio doesn’t make borrowing impossible, but it does mean repayment requires a deliberate plan, not a default assumption.
5. What is my credit profile, and would a co-signer help? Private loan rates are credit-dependent. Borrowers with 760+ FICO scores will see very different offers than those at 680. A creditworthy co-signer can unlock meaningfully lower rates if your individual score is lower.
6. Have I actually asked my program about institutional aid? Many students leave fellowship and assistantship funding on the table because they didn’t know to ask. One conversation with your financial aid office or program coordinator is frequently worth more than any loan optimization.
Frequently Asked Questions
Are Grad PLUS loans eliminated or just capped for 2026–27?
Eliminated for new borrowers. The One Big Beautiful Bill Act, signed July 4, 2025, ended the Grad PLUS program for new borrowers effective July 1, 2026. There is no capped version of the program. Students who had any federal Direct Loan disbursed before July 1, 2026 for their current program at their current school are grandfathered as legacy borrowers and can continue borrowing Grad PLUS for up to three more academic years (through 2028–29), or until they complete their current program, whichever comes first.
What is the federal Direct Unsubsidized Loan rate for graduate students in 2026–27?
8.07% fixed, with a 1.057% origination fee. The rate was determined on May 12, 2026 based on the 10-year Treasury auction yield of 4.468%, per the statutory formula in the Higher Education Act. This rate applies to all federal Direct Unsubsidized Loans for graduate students disbursed between July 1, 2026 and June 30, 2027, and is fixed for the life of the loan.
How much can a new graduate student borrow in federal loans for 2026–27?
New graduate borrowers can borrow up to $20,500 per year (with a $100,000 lifetime cap) through the Direct Unsubsidized Loan for standard master’s and doctoral programs. Professional programs, including law, medicine, and other qualifying professional degrees, have higher limits: $50,000 per year with a $200,000 lifetime cap. Students enrolled less than full-time receive prorated limits. Any amount above these federal caps must come from private loans or other sources. There is no longer a federal option to borrow up to the full cost of attendance.
Who qualifies for the Grad PLUS legacy provision in 2026–27?
Per Department of Education guidance, you qualify if you meet two conditions: (1) you had any federal Direct Loan (Unsubsidized or Grad PLUS) that was disbursed before July 1, 2026 for your current program of study at your current institution, and (2) you remain enrolled in that same credentialed program at that same school. The disbursement date matters; certification or origination before July 1 is not sufficient. Changing programs, transferring institutions, or taking a leave of absence may terminate legacy eligibility. Verify your status with your financial aid office before any academic changes.
Do private graduate loans qualify for PSLF or income-driven repayment?
No. Public Service Loan Forgiveness and all federal income-driven repayment plans, including the new Repayment Assistance Plan (RAP), apply exclusively to federal student loans. Private loans are completely ineligible, regardless of the borrower’s employer, career path, or repayment history. This is unchanged by the OBBBA.
What happened to SAVE, PAYE, and ICR?
SAVE, PAYE, and ICR are being phased out under the OBBBA and will be fully eliminated by July 1, 2028. Per NASFAA’s analysis, borrowers who take out any new federal loan on or after July 1, 2026 can only access the new tiered Standard Repayment Plan or the Repayment Assistance Plan (RAP) for those loans. Income-Based Repayment (IBR) is not being eliminated; it remains available, but only for borrowers who do not take out new loans after July 1, 2026. Taking out a new loan after that date closes IBR access for all your loans.
Does the new tiered Standard Repayment Plan qualify for PSLF?
No. The new tiered Standard Repayment Plan, the default for borrowers entering repayment after July 1, 2026, does not qualify for Public Service Loan Forgiveness, regardless of the repayment term. Graduate students borrowing new loans in 2026–27 who plan to pursue PSLF must proactively enroll in RAP when their loans enter repayment. RAP does qualify for PSLF. Payments made on the tiered Standard plan earn no PSLF credit and will not count toward the 120 qualifying payments required for forgiveness.
Should I refinance my graduate loans after graduation?
Refinancing private graduate loans after graduation, once income is established, is common and can result in a lower rate. Refinancing federal loans into a private loan is a permanent, one-way decision: you permanently lose PSLF eligibility, access to RAP, and all federal repayment protections. Unless you are fully certain you will never pursue PSLF or need federal repayment flexibility, refinancing federal loans into private is generally not advisable.
Bottom Line
The elimination of Grad PLUS under the One Big Beautiful Bill Act is the most significant change to graduate school financing since the program launched in 2006. The direct impact: graduate students starting new programs in 2026–27 lose access to a federal loan that previously covered up to 100% of school costs, and are now limited to $20,500/year (or $50,000 for professional programs) in federal borrowing, with private loans as the only option above those caps.
The less obvious impact is the repayment change. New borrowers who end up on the default tiered Standard plan and are pursuing PSLF will earn no forgiveness credit. That trap is worth being explicit about.
The students who navigate this well will be the ones who confirmed their legacy or new-borrower status early, exhausted institutional aid before touching private loans, shopped private rates in the right order (soft pulls first), compared by APR not rate, and enrolled in RAP when repayment began, not the default.
Information current as of May 2026. The 8.07% graduate Direct Unsubsidized rate reflects the May 12, 2026 Treasury auction and is confirmed for loans disbursed July 1, 2026 through June 30, 2027. Federal loan rules reflect the One Big Beautiful Bill Act (Pub. L. 119-21), signed July 4, 2025, effective July 1, 2026. Lifetime limit treatment of undergraduate borrowing toward the new graduate caps is subject to ongoing Department of Education guidance; verify your individual situation with your school’s financial aid office. Always confirm current rates at StudentAid.gov and directly with any private lender before applying. This article is for informational purposes only and does not constitute financial aid advice. Schedule a free consultation with a College Aid Pro advisor for guidance specific to your situation.
