Key Takeaway
- If you’re starting a new graduate program in fall 2026 and haven’t previously borrowed a federal Direct Loan for that program, your only federal option is a Direct Unsubsidized Loan. Capped at $20,500 per year for most programs, or $50,000 per year for professional programs like medicine and law. Any costs above that cap must come from private loans, which carry no income-driven repayment eligibility and no path to PSLF. That tradeoff deserves hard math before you sign.
As of July 1, 2026, the federal Grad PLUS loan program no longer exists for new borrowers. If you’re entering a graduate program this fall without a prior federal Direct Loan disbursement for that program, you’ve lost access to the one federal product that let grad students borrow up to their school’s full cost of attendance. What replaced it is a federal cap of $20,500 a year, and private loans for everything above that.
Higher education expert Mark Kantrowitz told CNBC in May that private student loan volume may double as a direct result of these limits. Students currently borrow roughly $10 billion a year in private student loans. If Kantrowitz’s projection holds, the market could be absorbing $20 billion annually within a few years. SoFi and other lenders disclosed to Congress that they are already preparing for expanded demand.
The Department of Education’s final RISE rule, published in the Federal Register on May 1, 2026, set the new limits in statute. For most graduate programs. Master’s degrees, Ph.D. programs, fields like nursing, physical therapy, and social work. The annual cap is $20,500, with a $100,000 lifetime limit. For the 11 programs designated as professional degrees (medicine, law, dentistry, veterinary medicine, pharmacy, and a handful of others), the cap is $50,000 annually and $200,000 lifetime. Before July 1, all of these students could borrow up to cost of attendance, no ceiling.
What ‘Going Private’ Actually Costs You
The dollar gap can be large. The average annual cost of attendance at U.S. medical schools runs close to $60,000. A first-year medical student starting in fall 2026 under the professional program limit can borrow $50,000 federally. That leaves a $10,000 hole in year one alone. Filled by private loans, institutional aid, savings, or some combination.
Here’s where the math turns serious. A $10,000 private loan at 12% over 10 years runs about $144 a month and costs roughly $7,240 in total interest. A comparable federal Unsubsidized Loan at the 2026-27 rate of 8.07% runs $121 a month and costs roughly $4,560 in interest over the same term. That’s a $2,680 difference on just $10,000. A student with a $40,000 private loan gap across their medical training is looking at a much larger number, and that’s before accounting for the federal protections that private loans don’t carry.
Those protections matter. Federal Grad PLUS loans carried a 9.07% rate for the 2025-26 academic year, which is high. But they came with income-driven repayment eligibility, Public Service Loan Forgiveness eligibility, and broad deferment and forbearance options. Private loans carry none of those. If you borrow $30,000 privately and then go into public service, teaching, nonprofit work, government, those payments will never count toward PSLF. Not one of them. That’s not a footnote; it’s the whole program.
There’s another detail private lenders don’t advertise loudly: roughly half of private lenders discharge a borrower’s debt upon death or permanent disability, according to Kantrowitz’s research. Federal loans discharge automatically. For a medical student or social worker taking on significant debt, the difference in what happens to a co-signer if the borrower dies matters.
Having spent years reading private student loan agreements, including helping my own sister consolidate $74,000 in private debt across four lenders, I can tell you the rate disclosure footnotes are where the real terms live. When a private lender advertises rates starting at 4.99%, the footnote on the rate disclosure page almost always specifies that rate requires a co-signer with a credit score of 750 or higher, auto-pay enrollment, and often the shortest available repayment term. Without that co-signer profile, you’re landing several tiers higher. For a graduate student with limited credit history and no income, the actual offered rate is frequently in the 10-14% range, not the headline number.
Who Is and Isn’t Grandfathered
About 440,000 students used Grad PLUS loans in the 2023-24 academic year, according to Federal Student Aid data cited by the American Council on Education. Not all of them lose access immediately. If you borrowed a federal Direct Loan, either Unsubsidized or Grad PLUS, for your current program before July 1, 2026, and you stay enrolled in that same program at the same school, you can continue borrowing under the old rules for up to three more years or until you complete the program. That grandfathering window is real, but it’s narrow.
Change your program, switch schools, or enroll in a new course of study after July 1, and the legacy provision disappears. You are now a new borrower under the new rules. The Department of Education has confirmed this. If you’re a second-year law student who transferred in fall 2026 to a different school, you are subject to the $50,000 annual cap from day one at the new institution.
There is also a separate complication for anyone pursuing best private student loans as the gap-filler: private lenders require a credit check, and many require a co-signer. The Consumer Bankers Association noted in a July 1 analysis that existing Grad PLUS borrowers can continue borrowing federally for most of the 2026-27 academic year, roughly $15 billion in expected Grad PLUS volume will still come from the federal government for current students. But by the 2028-29 school year, new Grad PLUS originations will be a fraction of today’s levels. The private market shift is gradual but structural.
For students heading into public service careers, healthcare, social work, public interest law, the decision to take private loans to cover a federal gap deserves a specific PSLF calculation before you sign anything. Take a $30,000 private loan at 11% over 10 years: the monthly payment is $413 and total interest is roughly $19,600. That same $30,000 on a federal Unsubsidized Loan at 8.07% runs $365 a month, or $13,800 in interest. But more importantly, if you’re pursuing PSLF and those $30,000 were federal, you’d owe nothing after 120 qualifying payments. The balance would be forgiven. Privately, there is no PSLF. Every dollar of that private balance gets repaid, full stop.
The Department has not announced any mechanism to convert private loans taken to fill the new gap into federal loans retroactively. Once you sign a private loan agreement, you are outside the federal system for that balance. That means no IDR, no PSLF, and no federal deferment. For best student loan refinancing companies options later, refinancing private-to-private is available, but refinancing private loans into federal loans is not possible.
If you’re starting graduate school this fall and need to fill a gap above the new federal limits, do the PSLF math before you borrow privately. For most public service-bound students, a smaller federal loan with forgiveness at 120 payments will cost less than a private loan paid in full, even at a nominally lower private interest rate. Run the numbers for your specific balance, income projection, and employer type. The Federal Student Aid Loan Simulator at StudentAid.gov is free and accounts for RAP, the new income-driven plan, alongside IBR.
