New federal regulations imposing strict limits on graduate student borrowing are poised to significantly alter how students finance advanced degrees, creating immediate challenges for tuition payments and raising concerns among educational institutions about future program accessibility.
Previously, graduate students could borrow federal funds to cover the full cost of tuition and living expenses for master's and doctoral programs. This often resulted in substantial long-term debt, contributing to widespread loan defaults. Effective July 1, annual borrowing for most graduate studies is capped at $20,500, with a lifetime limit of $100,000. Professional degree students in fields such as law, medicine, and dentistry face a higher annual cap of $50,000, with a lifetime limit of $200,000.
The median cost of a master's degree in 2020, before recent inflation surges, was $24,250, while professional degrees averaged $59,076, according to EdTrust. The Trump administration implemented these caps as part of a broader overhaul of federal student loan programs, asserting that uncapped graduate loans had driven up tuition costs and that the new limits would incentivize colleges to reduce expenses. While some institutions, like the UC Irvine graduate business school, have already adjusted tuition, education experts warn that these changes could disproportionately restrict access to higher education, particularly for students from lower-income backgrounds who may struggle to secure private loans.
Jennifer Delaney, an education finance expert at UC Berkeley, noted that while not an absolute lockout, the changes are likely to create an "inequitable lockout of folks from lower-income backgrounds." Wil Del Pilar of EdTrust emphasized that limiting access to graduate education, which typically leads to higher earning potential, could restrict socioeconomic mobility for these individuals. Diego Bollo, a prospective graduate student accepted into UCLA's Luskin School of Public Affairs, faces uncertainty regarding his enrollment due to the new loan limits, estimating his annual costs at $51,000. He is exploring teaching assistant and graduate researcher positions to waive tuition, but without them, he would need to consider expensive private loans, which he deems not worth the investment.
Several universities have begun to adapt. UC Irvine's Paul Merage School of Business reduced tuition for certain MBA programs, citing the new federal policy and student preferences as factors. Santa Clara University School of Law secured donor funding to provide scholarships for incoming students to help offset costs. However, experts like Delaney express doubt that such widespread cost reductions will occur broadly, given the labor-intensive nature of education and limited avenues for significant cost-cutting.
John Aubrey Douglass, a senior research fellow at UC Berkeley's Center for Studies in Higher Education, views the loan caps as part of a larger trend impacting higher education financing, potentially leading to labor shortages in critical professional fields. Bradley Curs, an associate professor at the University of Missouri, anticipates that some programs, especially at costly private institutions, may face enrollment declines, potentially leading to closures. Sandy Baum, an education finance expert at the Urban Institute, acknowledged the necessity of some restrictions to address the problem of excessive borrowing but characterized the current legislation as "not well thought out," particularly for degrees in fields with lower earning potential.
Universities like USC are informing students about the new limits and providing information on private lending options, while also reviewing program implications with academic departments. The University of California system has expressed significant concern about the financial impact on students and is advocating for legislative changes to ensure cost does not impede higher education access. The new regulations, part of a broader student loan overhaul, also include caps for parent PLUS loans. Uncertainty persists regarding the classification of "professional" degrees eligible for higher loan limits, following legal challenges that have expanded the initial designation.
