Federal caps on graduate student borrowing took effect July 1, 2026, leaving most grad students short by thousands of dollars a year. Now the Q3 earnings reports are in, and they show where that money is going: private lenders. SoFi reported student loan originations nearly doubled year over year. Sallie Mae said its graduate loan volume rose 119%. If you are planning for grad school, this shift has real consequences for your interest rate, your repayment rights, and your safety net if things go wrong.

The federal government's graduate loan caps were always going to push some borrowers somewhere. With third-quarter earnings data now in, we can see exactly where: into the accounts of private lenders.

An Associated Press investigation published November 6 found that students around the country are turning to private lenders to cover the gap left by the One Big Beautiful Bill Act's new limits on federal graduate borrowing.1 The shift is showing up in lender earnings in a way that is hard to ignore.

SoFi reported $2.9 billion in student loan originations in the third quarter of 2026 — nearly double what it originated a year earlier. Sallie Mae said its graduate loan volume rose 119% year over year. These are not small moves. They are companies cashing in on a federal policy change.

What Changed on July 1

Starting July 1, 2026, new graduate students can no longer take out federal Graduate PLUS loans. For most graduate programs, the new annual cap on unsubsidized federal loans is $20,500 per year, with a $100,000 lifetime limit. Professional students — in law, medicine, dentistry, and MBA programs — have higher limits ($50,000 per year, $200,000 lifetime), but many professional programs cost more than that over the full degree.2

A researcher at American University estimated that more than half a million borrowers will need to find roughly $20,000 a year from outside the federal loan program once the changes are fully phased in.1

That gap has to come from somewhere. For families with strong credit, private loans are an option. For students without an established credit history or a creditworthy cosigner, the options are narrower.

Three Things the Coverage Is Missing

1. Private loans lock out the students who need the most help.

Federal Direct loans require no credit check and no cosigner. Private loans from SoFi, Sallie Mae, and similar lenders generally do require both. Students with limited credit history — which describes most people entering a graduate program in their mid-twenties — often cannot qualify without a cosigner who meets the lender's income and credit standards. That is not a paperwork hurdle. For a first-generation student or someone without a financially stable parent, it may be an effective barrier to grad school enrollment.

2. The court injunction only protects specific health fields.

A federal judge issued an order blocking the new loan caps for graduate students in nursing, physician assistant studies, and several other allied health fields.1 That ruling helps students in those programs. It does not apply to law students, MBA candidates, students in MFA programs, education students, or social workers — all of whom are still subject to the caps. See the court ruling on nursing and PA programs for the full scope of who is covered.

3. Forty-plus schools have already cut costs.

According to data from the American Enterprise Institute, at least 40 institutions have reduced the cost of at least some programs since the loan caps took effect.1 That response is real and largely underreported. If you are applying to graduate school now, ask your target programs directly whether they have reduced tuition, restructured their financial aid model, or developed preferred lending partnerships. The answer may surprise you.

Before signing any private student loan, ask the lender for the full loan agreement — not just the rate summary. Federal loans come with income-driven repayment, deferment options, and potential paths to forgiveness. Private loans almost never do. The gap in consumer protections is at least as significant as any difference in interest rates.

Federal vs. Private: What You Are Actually Trading Away

The federal unsubsidized graduate loan rate for 2026-27 is 7.05%. Private graduate loan rates typically range from roughly 5% to 14% depending on credit score and cosigner status.

The rate range matters less than what comes with the loan. Federal borrowing gives you access to income-driven repayment plans, deferment if you lose your job, and eligibility for public service loan forgiveness if your career path qualifies. Private loans almost never offer any of that. For a graduate program in a field with variable or modest starting income — arts, education, social work, nonprofit management — those federal protections are worth more than a percentage point or two on the rate.

For a full side-by-side breakdown of what you are giving up, read federal vs. private student loans.

What to Do If You Are Planning for Grad School

Before you apply:

Run the real numbers. Take the total cost of your program across all years. Subtract $20,500 per year from federal loans (or $50,000 if you are in a professional program). Whatever is left is your funding gap. Know that number before you commit to any program. For a full framework, how to pay for graduate school walks through every funding source.

Ask programs what they have done in response to the caps. Schools are cutting costs and restructuring aid. Many are not advertising it loudly. Ask your programs directly — by email or in an admission interview — before you assume you know what it will cost you.

Before you take a private loan:

Compare at least three lenders. Rate differences of two to three points compound significantly over a ten-year repayment term. The best student loans for college explains how to evaluate the full picture beyond the headline rate.

Understand every student loan type available and what protections each one carries before you borrow anything.

Think hard about how much student debt is too much for your expected income in the field you are entering. That calculation gets harder — and riskier — when part of your debt is in private loans with no income-based fallback.

For anyone still weighing whether graduate school is worth it financially, graduating from college debt-free covers how some students complete graduate programs without borrowing.

If you are already enrolled under a Grad PLUS loan:

The elimination applies to new borrowers starting July 1, 2026. If you are an existing Grad PLUS borrower, you can continue borrowing under that program for up to three additional academic years or until your program ends, whichever comes first. Contact your financial aid office now if you are unsure of your eligibility window.

The loan caps were sold as a way to curb runaway graduate debt. The first evidence from lender earnings reports suggests the main effect so far is a transfer: borrowers moving from a federal system with built-in consumer protections to a private market without them. Schools cutting tuition is good news. But it is not uniform, and it does not help every student equally. If you are heading to grad school in 2027, the gap is real, and planning around it is now part of the application process.

Footnotes

  1. Associated Press. (2026, November 6). New limits on federal student loans are steering many borrowers toward private lenders. NBC Los Angeles. https://www.nbclosangeles.com/news/national-international/federal-student-loan-caps-steer-borrowers-private-lenders/3967050/ ↩ ↩2 ↩3 ↩4

  2. University of Connecticut Office of Student Financial Aid Services. (2026). Loans for graduate students. financialaid.uconn.edu. https://financialaid.uconn.edu/loans-for-graduates ↩