At the center of the overhaul enshrined in the One Big Beautiful Bill is the phaseout of the federal Grad PLUS loan program, which for two decades allowed graduates to borrow up to the full cost of attendance. Beginning summer 2026, new federal borrowers will be capped:

• Graduate students can borrow $20,500 per year ($100,000 lifetime maximum).
• Professional students (e.g. law, medical and dental school) can borrow $50,000 per year ($200,000 lifetime maximum).
• A separate lifetime limit of $257,500 will be applied to all student loans (excluding Parent PLUS loans borrowed on a students’ behalf. Parent loans have a new lifetime cap of $65,000).

The gap between these limits and actual tuition costs can be stark. The average cost of a master’s degree is about $63,000, whereas the average medical school graduate from the class of 2025 paid just shy of $229,000, according to the Education Data Initiative.

That Grad PLUS shortfall hits a relatively small share of students but an outsized share of dollars. Only about 16% of graduate students have relied on Grad PLUS loans, but the program accounted for 32% of federal-loan disbursements, according to a report from Georgetown University’s Center on Education and the Workplace. The reason: Those who tapped it were often enrolled in the most expensive programs.

The U.S. Department of Education has argued the student-loan rules will help “prevent students from taking on insurmountable levels of debt.” But many advocates warn the opposite may happen, forcing borrowers into riskier forms of financing.

“These moves can narrow pathways for those who most depend on federal support—students from low-income families, first-generation students, and communities of color,” Yolanda Watson Spiva, president of Complete College America, told Fortune. 

“By taking away federal support, graduate education becomes much less accessible, raising new barriers to upward mobility.”

Private lenders stand to benefit. Already a $7 billion business last year, Sallie Mae projects private-loan originations could increase by up to about 70% as a direct result from the federal pullback. “We anticipate that the new federal lending limits could generate an additional $4.5 billion to $5 billion in annual private education loan origination volume for Sallie Mae once the transition… is fully realized,” CEO Jonathan Witter said during Sallie Mae’s earnings call in July.

Unlike federal loans, private student loans come with fewer protections and higher costs. Sallie Mae advertises graduate student loan interest rates as high as 14.99%—close to double the current federal rates. They also typically require strong credit scores or co-signers, which can advantage less affluent borrowers.

The college decision moves upfront

Changes to the federal student-loan program could pressure universities to rethink their tuition strategies. On one hand, fewer borrowing options may dampen demand and encourage schools to keep costs in check. On the other, it could just as easily result in seat cutbacks—or even the elimination of some graduate programs altogether. 

“Institutions will have to focus on how they design, fund, and market graduate programs to return value to students, whether that is by establishing clearer career pathways or shifting to more workforce-aligned programs,” Watson Spiva said. “Ultimately, the programs that survive this transition will be those that can demonstrate not just their academic value, but provide a direct bridge to economic mobility and opportunity after completion.”

Moving forward, students will likely need to make more strategic decisions from the outset to avoid financial hardships during or after their studies.

“Look at the whole picture and create a plan for yourself. This was always the advice, but it’s more important than ever to have that plan as a grad student, to not just jump in thinking you know what you need and you’re going to figure it out,” Elaine Rubin, director of corporate communications at Edvisors, told Fortune.

Resumed payments spark a ‘financial reckoning’

For many borrowers, the thought of taking on new graduate debt is compounded by the reality of repaying existing loans. For many borrowers, the Biden-era pauses on federal student-loan payments have ended, and interest is once again accruing.

Put simply, with payments resuming, borrowers are facing a “financial reckoning,” according to Joshua Turnbull, senior vice president and head of consumer lending at TransUnion.

“Combined with the broader impact of elevated inflation and a higher cost of living, the threat of involuntary collections is causing a potential shake-up amidst the traditional payment hierarchy,” Turnbull said in a press release. “Many are being forced to make difficult, short-term prioritization decisions as cash flows fail to meet spending and debt obligations.”

Nearly one in three federal borrowers in repayment—29%—are more than 90 days past due, according to data analyzed by TransUnion. Among those who have missed payments, almost half cited affordability as the main reason, while one-third admitted to prioritizing other bills instead.

Yet advocates stress that higher education remains a strong investment, despite rising costs and debt pressures. After all, the average bachelor’s degree delivers a nearly 682% lifetime return on investment, while a professional degree raises that ROI to more than 2,200%.

“More—not fewer—people need the chance to pursue college and graduate study, so they can learn the practical skills along with the technical expertise that get developed with a postsecondary education,” Watson Spiva said.

“Institutions and policymakers alike must invest in solutions that reckon with not just student loans but the cost of education, to keep higher education within reach for all students and not just the few who can afford it.”