Federal Grad Loan Caps Hit July 1 — and Private Lenders Won't Save Everyone
Nearly 4 in 10 grad students who need private loans to cover new federal borrowing caps have subprime or no credit — meaning they may not qualify for private loans at all when limits kick in July 1.
Starting July 1, federal graduate loan limits replace the eliminated Grad PLUS program, capping borrowing at $20,500 or $50,000 per year depending on your program — and private lenders are being counted on to fill the gap. The problem: nearly 4 in 10 postbaccalaureate students who will need additional financing have subprime credit scores (below 670) or no credit history at all, according to American University's Postsecondary Education and Economics Research Center, making them ineligible for most private loans. Some stopgap lenders are emerging — Delaware invested $800,000 in a start-up called GradBridge — but its interest rates run 18 to 23 percent, far above the typical private loan range. On the upside, more than 70 percent of the 13,594 graduate programs analyzed by Leadership Brainery fall below their respective loan limits, meaning many students won't face a gap at all. If you're starting or continuing a grad program this fall, check your program's total cost against the new federal limits now — before July 1 — and exhaust grants, institutional aid, and scholarships before considering any private loan.
This issue draws on reporting and data from Inside Higher Ed.