The Consumer Bankers Association has released a new white paper outlining how the student lending market will change as the federal Grad PLUS loan program is phased out, a shift that could reshape how graduate education is financed starting this July. The report analyzes how private lenders may step in to fill the gap, estimates that roughly 75% of borrowers who would have relied on Grad PLUS could still access private credit, and lays out policy recommendations aimed at improving transparency, underwriting, and borrower outcomes as the market transitions. For organizations that service, collect, or otherwise engage with borrowers carrying student loan debt, the paper offers an early look at how repayment dynamics and borrower profiles may evolve.
Why Grad PLUS Is Going Away
Congress eliminated the Grad PLUS program in July 2025 as part of a broader effort to rein in rising graduate tuition costs. Grad PLUS loans were historically issued without meaningful ability-to-repay analysis, a structure that CBA notes left many borrowers overextended and cost taxpayers an estimated 25 cents for every dollar lent. While existing borrowers can continue accessing Grad PLUS loans for a limited period, new originations will largely disappear by the 2028–2029 academic year.
Private Lending Steps In, With Limits
According to the paper, private lenders could underwrite loans for most former Grad PLUS borrowers, particularly those in higher-earning professional programs such as law, medicine, and business. However, underwriting in the private market will look different. Loans will be risk-based, rely on credit history and expected earnings, and lack income-driven repayment features that federal loans provided.
CBA estimates that only about 2.5% of all incoming graduate students may face financing gaps, but those gaps are likely to be concentrated among lower-earning programs and borrowers with weaker credit profiles.
Key Policy Recommendations
To support a smoother transition, CBA urges policymakers to:
- Improve federal data availability by releasing anonymized, loan-level program and repayment data to support responsible underwriting.
- Provide clearer fair-lending guidance so lenders can use program-level data compliantly.
- Encourage states and schools to address affordability directly through grants, tuition reductions, and targeted aid.
