Major Federal Aid Shift: Grad PLUS Loans Eliminated for New Borrowers Starting July 2026

A major federal student aid program that has long enabled graduate and professional students to finance costly degrees at elite universities is being eliminated, effective July 1, 2026. The change, mandated by the One Big Beautiful Bill Act (OBBBA) signed into law in July 2025, removes the Direct Graduate PLUS Loan program for new borrowers, according to the National Association of Independent Colleges and Universities (NAICU) and Federal Student Aid announcements. This program has historically allowed students in graduate, business, law, and medical schools to borrow up to the full cost of attendance, minus other aid.

The elimination of Grad PLUS loans represents a seismic shift in graduate education financing. As outlined in the NAICU's Frequently Asked Questions, "the bill eliminates Grad PLUS borrowing – which currently allows graduate students to borrow up to the full cost of attendance for their program." This forces a fundamental restructuring of how students cover tuition and living expenses at high-cost institutions. New federal borrowing limits for graduate students will now be capped at the aggregate limits for unsubsidized Direct Loans—currently $138,500 for graduate students, with no more than $65,500 of that amount in subsidized loans. For many students in multi-year professional programs, this federal cap may fall far short of total costs.

The onus now falls on elite universities and students to bridge the funding gap. Institutions with high-ticket graduate programs must rapidly develop alternative financing strategies, including expanded institutional aid, private loan partnerships, and revised budgeting for prospective students. Financial aid offices are in the midst of updating their communications and packaging for the 2026-27 cycle. As noted by NASFAA, the legislation "contains significant provisions that reshape student financial aid," and they have created a dedicated resource center to track its implementation. For families planning for advanced degrees, this change necessitates earlier and more comprehensive financial planning, with a greater reliance on scholarships, savings, and income-based repayment plans for the remaining federal loans.