Will new loan limits lower the cost of grad school?

Summary

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Episode Overview

Podcast: The Indicator from Planet Money (NPR)
Episode Title: Will new loan limits lower the cost of grad school?
Date: December 16, 2025
Hosts: Darian Woods & Waylon Wong

This episode explores the recent elimination of federal Grad PLUS loans for most graduate students under the “One Big Beautiful Bill” Act. The hosts break down how decades of unlimited graduate lending drove up student debt and may have contributed to rising tuition, and discuss whether new, lower federal loan limits might lower the cost of graduate school or have unintended consequences for students and the labor market.

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Key Discussion Points and Insights

Current Labor Market Context

• Jobs update: The US added 64,000 jobs in November; the unemployment rate rose to 4.6% due to delayed data from a government shutdown. (01:21–01:55)
• Healthcare Labor: Healthcare saw job growth, but new federal loan changes could shrink the pipeline of many healthcare workers. (01:55–02:02, 02:02–02:26)

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Background: Grad PLUS Loans and Their Impact

Unlimited Lending and Tuition Inflation

• What was Grad PLUS?

  • Federal loan program established under Bush allowing graduate students to borrow up to the full cost of attendance—including tuition, books, living expenses, and childcare—with no set borrowing limit. (03:48–04:02)

• Tuition and Debt Concerns:

  • Preston Cooper (American Enterprise Institute):

    “Colleges took a look at these unlimited student loans that were available and said, hey, we could actually kind of use this as a cash cow... The result is that the graduate portion of the student debt portfolio really grew.” (04:22–04:41)

• Bennett Hypothesis:

  • The idea that boosting federal student aid encourages schools to hike prices. (04:41–04:54)

Research Findings

• Leslie Turner (University of Chicago):
  • Studied whether Grad PLUS loans caused tuition inflation.
  • Finding:

    "For every dollar increase in average federal borrowing, sticker prices went up by about a dollar." (05:40–06:02)

    • Even when schools gave grant aid, net price still increased 60–65 cents per dollar extra borrowed.
  • Research was unexpectedly timely given the policy change. (05:07–05:30)

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Policy Change: Elimination of Grad PLUS

Rationale for Change

• Trump-era Law: The new Act eliminated Grad PLUS for new borrowers, aiming to restrain tuition inflation and limit graduate debt. (04:02–04:21)
• Will tuition fall?
  • Department of Education: Anticipates tuition cuts as schools adjust to students’ reduced borrowing power. (06:15–06:27)
  • Preston Cooper: Notes some early movement, e.g., Santa Clara Law School, which lowered costs via new scholarships in response to the policy.

    “Early signs of tuition cuts are encouraging.” (06:41–06:46)

  • Leslie Turner is skeptical:

    “It’s quite rare to see price decreases in sort of nominal dollar terms. If there is an effect... it will be an effect that shows up over time as programs increase their prices by less.” (06:56–07:15)

Unintended Consequences and Equity Issues

• Private Lending: Students may be pushed toward private loans lacking federal protections (e.g. forgiveness for public service, income-driven repayment).
  (07:15–07:30)

• Aissa Kanchola Banias (Protect Borrowers):

  "Federal loans come with an array of protections and benefits that are just non existent within the private student loan market." (07:30–07:51)

  • Eliminating Grad PLUS especially affects low-income, first-generation, and Black and brown students, possibly widening inequity. (07:51–08:04)

• Workforce Diversity Concern:

  • Black women: Need a master's degree to outearn white men with only associate’s degrees. Loans are crucial for access. (07:51–08:04; 08:04–08:32)
  • However, Turner's research didn't show Grad PLUS had a measurable effect on underrepresented students’ access. Barriers extend beyond loans. (08:32–08:45)

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New System: Loan Limits & "Professional" Caps

• New Loan Caps:

  • Most graduate students: Lifetime federal loan limit drops from $139,000 to $100,000.
  • "Professional" programs (medicine, dentistry, pharmacy, law): Cap is $200,000. (09:03–09:20)
  • Only 11 programs get this higher cap; most health fields (nursing, dental hygiene, etc.) do not, causing “uproar.” (09:20–09:33)

• Professional Designation:

  • Preston Cooper (AEI):

    “This is simply a technical term... my degree, which is a PhD in economics, is not professional... I still consider myself a professional.” (09:33–09:54)

  • Dispute is more than semantics:
    American Medical Association warns new $200k limit may still be too low, deterring potential doctors due to costs above that figure. (09:54–10:19)

• Rulemaking Ongoing:

  • Department of Education will seek public feedback before finalizing rules. (10:19–10:40)

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Notable Quotes & Timestamps

• Preston Cooper:

  “Colleges took a look at these unlimited student loans that were available and said, hey, we could actually kind of use this as a cash cow...” (04:22)

• Leslie Turner:

  "For every dollar increase in average federal borrowing, sticker prices went up by about a dollar." (06:00)
  “It’s quite rare to see price decreases in sort of nominal dollar terms.” (06:56)

• Aissa Kanchola Banias:

  "Federal loans come with an array of protections and benefits that are just non existent within the private student loan market." (07:30)

• Preston Cooper (on professional status):

  “My degree, which is a PhD in economics, is not professional... I still consider myself a professional.” (09:33)

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Segment Timestamps

• Labor market update: 01:21–01:55
• Intro to Grad PLUS elimination: 02:02–03:48
• History and impact of unlimited lending: 03:48–04:41
• The Bennett Hypothesis explained: 04:41–04:54
• Research findings on tuition inflation: 05:07–06:15
• Will tuition drop? Arguments and skepticism: 06:15–07:15
• Equity/Access and unintended consequences: 07:15–08:45
• How new loan caps work, resisted by some fields: 09:03–10:19
• Next steps in rulemaking: 10:19–10:40

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Tone and Style

Hosts balance economic clarity with accessibility, blending concise explanations, expert interviews, and a touch of wry self-awareness (“I still consider myself a professional!”). Experts provide nuanced analysis of both intended and potential side effects of rapid policy change.

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Summary

This episode investigates whether capping federal graduate loans will lower tuition or instead drive students toward high-risk private loans and worsen access for disadvantaged groups. It presents evidence that aggressive lending did increase tuition, but guests are skeptical that schools will now lower sticker prices. The conversation closes with questions about who is left out by new loan caps, especially in high-cost health fields, as federal policymakers consider public input on the final shape of graduate lending in the US.

Transcript

[A]

Hey, everyone, it's Darian woods here. Just quickly, before we start the show, I want to take a minute to talk about public media. This is what makes the Indicator and other NPR podcasts special. Public Media was founded to inform, to educate and to expand our perspective. But as of this fall, federal funding for public media, including NPR and local NPR stations, has been eliminated. Despite that, we remain committed to this work. Just this year, we've done episodes on why the trade war is missing, a referee on the stock market and the magic of diversification on the surging cost of healthcare for pets. We go beyond the headlines to show you how the economy affects your life in 2026. With your help, we can do even more. Thank you. If you already go the extra mile as an NPR supporter. If not, you, you can join the PLUS community, get a bunch of perks like bonus episodes from across NPR's podcasts, and support public media by signing up for NPR today. Just go to plus.NPR.org NPR. This is the Indicator from Planet Money. I'm Darian Woods.

[B]

And I'm Waylon Wong. It is jobs Tuesday. Yes, Tuesday. The government is still catching up with some delayed data releases after the shutdown. Today we have numbers for November, and they show signs of a cooling labor market. The Bureau of Labor Statistics says that the US economy added 64,000 jobs in November, but the unemployment rate ticked up to 4.6% from 4.4% in September. The BLS couldn't calculate a jobless rate number for October because of the shutdown.

[A]

One of the areas that did see job growth was healthcare. This is a field that has trended up in the last few years, but.

[B]

The One Big Beautiful Bill act made some dramatic changes to federal loans for graduate students, and this could reduce the pipeline of new health care workers from dental hygienists to physical therapists. Today on the show, we explain these changes and how they might play out in the labor market.

[C]

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[B]

We are focusing on graduate students today. This is a group whose borrowing has driven most of the growth in student debt over the last 15 years. Many graduate students in the US took out loans through a federal government program called Grad Plus.

[A]

This program was introduced a couple of decades ago during the George W. Bush administration. Under Grad plus, students could borrow to cover not just tuition, but books and housing and even childcare. There were no other restrictions on borrowing.

[B]

The generous nature of Grad plus caught the ire of the Trump administration. It got rid of the loan program for new borrowers under the One Big Beautiful Bill Act. Preston Cooper is an economist at the American Enterprise Institute. It's a right leaning think tank. Preston says the government made the right call because Grad plus loans had led to high debt levels and tuition increases.

[D]

I think the problem we ran into is that colleges took a look at these unlimited student loans that were available and said, hey, we could actually kind of use this as a cash cow. You know, we could create some new programs, we can raise our tuition. And the result is that the graduate portion of the student debt portfolio really grew.

[B]

There's actually a name for this idea that increased generosity and federal student aid leads to schools hiking their prices, called the Bennett Hypothesis. Named after an Education secretary who served during the Reagan administration, the Bennett Hypothesis.

[A]

Has been the subject of debate for decades. But does it bear out for the Grad plus program? We called up economist Leslie Turner at the University of Chicago. She recently co authored a working paper about these loans.

[B]

When you got started studying the Grad plus program, did you have any inkling that it was just going to go away entirely? No, we did not.

[E]

I think this is the first time that my research has been incredibly well aligned in terms of timeliness with public policy decisions.

[A]

Leslie and her co authors studied the impact of the Grad plus loan on students in schools. They used the data from Texas as a representative sample for the whole country.

[E]

We looked at the increase in federal borrowing and then we looked at whether there were corresponding increases in sticker price and then net price, so tuition fees net of grant aid. What we found was that for every dollar increase in average federal borrowing, sticker prices Went up by about a dollar.

[B]

Leslie's data seems to back up Preston's point. A dollar for dollar increase. Now, some schools did offer grant aid, but even then, Leslie says the net increase was notable at around 60 to 65 cents.

[A]

Now, the Trump administration has eliminated grad plus. And so should we expect this chain of events to work in reverse with schools cutting their tuition prices? The Education Department says yes.

[B]

And Preston Cooper at the American Enterprise Institute points to the law school at Santa Clara University in California. The school announced a new scholarship program in response to the federal policy changes. This move effectively lowers the cost of law school.

[D]

It is still early on in the process, but the early signs of tuition cuts are encouraging.

[A]

Okay, we'll see if this is spread around the country.

[B]

Yeah. Economist Leslie Turner is skeptical that schools in general will cut sticker prices for their programs.

[E]

I think it's, it's quite rare to see price decreases in sort of nominal dollar terms. If there is an effect on graduate program prices, it will be an effect that shows up over time as programs increase their prices by less.

[A]

Without Grad plus, students and their families may borrow more from private lenders. That's according to Aissa Kanchola Banias. She's the policy director for Protect Borrowers. It's a national organisation that advocates for students and other people with debt.

[B]

Federal loans come with an array of protections and benefits that are just non existent within the private student loan market. One benefit is debt forgiveness for graduates who work in public service. Another is repayment plans that are tied to income and family size. Aissa says students turning to private lenders will be at a disadvantage.

[A]

And many of these students already face disparities in the workplace. According to the National Women's Law center, black women working full time and year round have to earn a master's degree to make more than white men with only an associate's degree.

[B]

When we talk about who is most likely to have to borrow in this country, we know it's lower income families, it's first generation families, and it's black and brown families in particular. So we were very concerned about the elimination of the Grad plus program, especially as they were not considering increasing grant aid. Still, the data from economist Leslie Turner's study of Grad plus didn't show the program had an impact on access for underrepresented students in graduate programs.

[A]

And she believes there could be many reasons why Grad plus didn't move the needle for these students. Like maybe their barriers to education had more to do with their grades or family commitments than whether or not they could borrow money from the government even.

[B]

With the end of grad. Plus, there are other federal loan programs for graduate students, but the one big Beautiful Bill act changed how much those students can borrow. It set both annual and lifetime limits for most graduate students. The lifetime cap dropped from around $139,000 to $100,000.

[A]

A smaller group of students in programs designated as professional can borrow up to $200,000. Preston Cooper @ the American Enterprise Institute says these are programs that tend to be expensive but also lead to high paying jobs. That means graduates have a better shot at paying back their.

[B]

Loans. Eleven programs got the professional designation. They include medicine, dentistry, pharmacy and law. Other graduate programs in fields like dental hygiene and nursing did not, and this caused a bit of an.

[D]

Uproar. This is simply a technical term to define which programs get access to these higher student loan limits. And I should also mention my degree, which is a PhD in economics, is not professional. And I still consider myself a professional. I mean, maybe your listeners won't, but you know, I consider myself a professional and I'm not really insulted by the fact that my degree ended up on the standard.

[A]

Side. The pushback against this new definition, though, is more than just about semantics. The American Medical association says the changes in federal lending could make medical school unavailable, affordable for most students. The cost of attending for many programs is well above $200,000. The AMA has warned that prospective doctors could be put off by the high cost of education and choose not to pursue a.

[B]

Degree. The exact language around the Department of Education's new rules aren't finalized. It is expected to collect public comment next year. This episode was produced by Corey Bridges with engineering by Debbie Daughtry. It was fact checked by Sierra Juarez. Kicking Cannon is our show's editor and the indicator is a production of.

[C]

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[B]

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