What the Grad PLUS Phase-Out Means for MBA Students

Starting July 1, 2026, new graduate students no longer have access to Grad PLUS loans, the federal program that let them borrow up to their school’s full cost of attendance. Hard borrowing caps replace them, and MBA programs land on the wrong side of them. The degree costs about as much as law school, but it didn’t make the federal government’s short list of “professional” degrees, so it gets a lower loan cap than law or medicine, according to the American Council on Education.

“My fear is what it will do is cause schools to drop programs, making there be less choice and competition for certain programs,” says student loan expert Betsy Mayotte. A top 25 MBA now costs about $231,000, according to GMAC, roughly in line with law school. Law and medical students can still borrow up to $200,000 in federal loans. MBA borrowers are capped at $100,000.

MBA hires start at a median of $125,000, per GMAC’s Corporate Recruiters Survey. That’s a solid return, but it still leaves a real gap between what the degree costs and what federal loans now cover. 

Betsy Mayotte has spent more than 25 years in student loan policy, including negotiating federal rulemaking sessions, and she has a clear read on where students will have to look to close it. Keep reading to learn more.

Meet the Expert: Betsy Mayotte

Betsy Mayotte is the president and founder of The Institute of Student Loan Advisors (TISLA), the nonprofit behind Free Student Loan Advice. She has spent more than 25 years in the student loan industry, most of it in compliance, policy, and borrower advocacy. She founded TISLA in 2017 to give borrowers access to free, neutral student loan advice. She has served as a negotiator in multiple federal negotiated rulemaking sessions and has advised members of Congress on student loan policy.

Programs at Risk: The Earnings Test Behind the Cap

Mayotte doubts the new caps alone will bring tuition down: “I think Congress thought that by getting rid of Grad PLUS and putting these pretty hard limits on both Parent PLUS as well as graduate and professional degree borrowing, that it might force schools to lower their tuition. I’m not so sure that’s going to be the result,” she says. “We’re going to have to wait a few years to see what the ultimate result will be.”

She points to a second, less-discussed piece of H.R. 1 that could push in the same direction: an earnings test tied to Title IV eligibility: “If the students that participate in a program aren’t any better off financially than their peers who didn’t participate in that program, then that program could lose eligibility,” she explains. Her example: an undergraduate program whose graduates don’t out-earn someone with only a high school diploma eventually loses access to federal aid entirely. Applied to graduate business programs, the same logic means schools with weak post-MBA earnings outcomes, not just high price tags, are the ones most exposed.

Filling the Gap: Private Loans Step In

With Grad PLUS gone, Mayotte says most MBA students without an employer footing part of the bill have one option left. “Especially in the graduate realm, if you don’t work for an employer that does tuition reimbursement, your option is private loans,” she says. “Private loans can be very difficult to manage if you can’t afford the payment. They very rarely have any type of lower payment option, and they don’t have the safety nets that federal loans do.”

She already sees the consequences, even among borrowers who took out loans before the new limits kicked in: “We get emails at TISLA often. I had one last week: they owed over $300,000 in private loans, and their income was $50,000. They literally don’t take home enough money to make the payment,” she says. “And that doesn’t just affect the student borrowers. In almost every one of those cases, there’s a cosigner in the mix.” In this particular borrower’s case, the grandmother, the uncle, and the mother had all cosigned. “They weren’t really in the financial position, for the most part, to take over those payments,” Mayotte says. “I am really concerned about that.”

Credit Checks Change Who Gets In

For most students, federal loans have a low barrier to entry: “Grad PLUS loans do have a credit check. It’s mild. They don’t look at debt-to-income ratio; they don’t look at credit score,” Mayotte explains. “They’re looking for if you’re in active collections of a certain amount, or if you have one of the big whammies: judgment, bankruptcy, that kind of thing.”

Private lenders run stricter credit checks, and most students can’t qualify on their own. “Almost every private loan borrower is going to need a cosigner. Almost everyone,” she says. “If you look at the student loan sub on Reddit, which is the best free focus group you’ll ever have, you’ll see posts all the time: how do I get a private loan without a cosigner? And the answer is, in most cases, you don’t. And if you do, oftentimes the terms can be really unfavorable.”

Loan Forgiveness Is Still An Option

Public Service Loan Forgiveness (PSLF), the program that cancels remaining federal loan balances after ten years of qualifying nonprofit or government work, is still on the table for MBA graduates, Mayotte says, despite the degree’s business-world reputation. “Nonprofits need finance people too. The government needs finance people. PSLF is alive and well,” she says.

The one group PSLF effectively excludes now is Parent PLUS borrowers, who lose access unless they consolidated their existing loans by July 1. For everyone else, the plan options just decreased. New borrowers have only one PSLF-eligible repayment plan, the Repayment Assistance Plan (RAP). Existing borrowers still have access to Income-Based Repayment (IBR) and, for the next couple of years, Income-Contingent Repayment (ICR), Pay As You Earn (PAYE), and RAP, all of which count toward PSLF.

What MBA Students Should Do Now

Students who are planning on enrolling in an MBA program can help prepare themselves. Here is Mayotte’s advice:

Project the Full Cost, Not Just This Year’s Bill

“A lot of people get into the mindset of I’m going to worry about paying for this year; I’ll worry about next year, next year. You can’t do that anymore,” she says. “You need to project how much the whole program is going to cost you, how much you’re going to end up with in loans, and most importantly, what that’s going to mean for your monthly payment amount and for how long. Because once you’re out, it’s too late to worry about the payment. It is what it is, and there’s no takeback.”

Use a Loan Calculator Before You Borrow

That kind of planning rarely comes from the school itself, Mayotte says. “The financial aid office doesn’t have the bandwidth to help every student project their payments.” Her workaround: “If you Google loan calculator, there’s a million of them out there. Figure out how much the school costs, how much you’re getting in aid, and how much you’re going to have to borrow, then multiply that by how many years, and then some, because you have to account for tuition and fee increases,” she advises. “A lot of people take longer to finish than they think they’re going to, so you have to round up by a good chunk.”

Consider Part-Time Enrollment or Employer Tuition Reimbursement

Slowing down can pay off later. “Students can go part time and take longer to get their degree and work full time and pay out of pocket. Not ideal. A lot of people don’t want to do that or feel like they can handle it,” she says. “But what I always say is their future selves will thank them from the financial perspective. If it takes you four years to get that MBA but you don’t have debt that you can’t afford to pay for 15 years after that, it’s worth it. Even better if you can find an organization to work for that does at least some tuition reimbursement.”

Know the Bankruptcy Myth Isn’t True

One misconception Mayotte hears constantly is that student loans can never be discharged in bankruptcy. “All student loans are eligible for discharge in bankruptcy. It’s not easy,” she says. Borrowers have to file what’s called an adversarial proceeding and show they made payments in good faith, that the payments would prevent a basic standard of living, and that their situation isn’t likely to improve. It isn’t a same-day fix. “This isn’t something where you graduate today, you file for bankruptcy tomorrow,” she says. 

But it happens more often than most people think. Borrowers who filed adversary proceedings to discharge their student loans succeeded 87 percent of the time, according to a 2025 study by University of Utah law professor Jason Iuliano. “Hardly anybody does it because people say, ‘Oh, you can’t discharge your loans in bankruptcy,'” Mayotte says. “That’s why I get my back up when people say that.”

The Bigger Economic Ripple

Mayotte’s biggest worry isn’t any single student’s balance. It’s what happens next, across the entire private loan market. “As more students have to take out private loans, and if life hits someone with a left hook and they can’t afford those payments, I think we’re going to see a much higher delinquency and default rate on the private loan sector,” she says. That kind of credit damage doesn’t stay contained to a monthly statement.

“There are some employers that don’t want to hire you if your credit’s bad,” she says. “It means other areas of credit for them are going to be more expensive. They might get denied mortgages and car loans. So this really has potentially a much broader economic impact than just higher education.”