Eliminating Grad PLUS does not eliminate the need to pay for graduate school. Students who cannot cover costs through savings, family resources, or employer sponsorship can be reasonably expected to turn to private lenders. The question is whether that market can absorb the demand. The available evidence suggests it cannot.
The Scale Mismatch
Grad PLUS originates $15 billion per year. The new $50,000 professional cap offsets an estimated $2–4 billion; the remaining $11–13 billion in net displacement must be absorbed by a private market that originates roughly $14 billion per year across all borrower types, undergraduate and graduate combined.
Because private student lending is funded primarily through securitization (Student Loan Asset-Backed Securities), even a partial displacement of the Grad PLUS volume would need corresponding growth in warehouse credit lines, SLABS issuance, and investor appetite for a borrower pool that previously existed entirely within the federal system. That infrastructure has historically expanded gradually in response to market demand, not all at once.
Author's note: Enterval Analytics (formerly MeasureOne) tracks private student loan originations by contributing lenders representing approximately 70% of the active market by origination volume. Their contributors originated $10 billion in AY 2022-23 (Enterval, Private Student Loan Report, Q3 AY 2024-25). Extrapolating to the full market, assuming comparable origination intensity among non-contributing lenders, yields roughly $14 billion. At the estimated $11–13 billion net displacement, the $14 billion private market would need to nearly double. Even if the true market is 50% larger ($21 billion), absorbing the displaced volume would still require more than 50% growth in total origination.
Why Private Lenders Won't Fill the Gap Equally
Grad PLUS operated on a fundamentally different credit model than private lending:
| Feature | Grad PLUS (Pre-2026) | Private Lenders (Post-2026) |
|---|---|---|
| Borrowing limit | Cost of Attendance (unlimited) | Risk-based; varies by borrower |
| Credit check | Pass/fail (adverse history only) | Full underwriting (FICO, DTI, income) |
| Income verification | None | Required |
| Co-signer | Rarely needed | ~90% of loans require a co-signer |
| Approval rate | Effectively all applicants without adverse credit history | Under 10% for solo applicants without a co-signer |
| Collections power | Wage garnishment, tax offset, no statute of limitations | Standard commercial collections |
Grad PLUS acted like a pipe; everything flowed through. The private market is a filter. According to Enterval Analytics, approximately 90% of private student loans require a co-signer, and industry-wide approval rates for solo applicants without a co-signer are estimated at under 10% (CFPB, Annual Report of the Student Loan Ombudsman, 2024). The critical difference: the federal government could lend against a student's future income. Private lenders lend against current assets. Most full-time graduate students have no meaningful current income; without a co-signer, they are effectively ineligible regardless of their academic qualifications or expected career trajectory.
The Four-Tier Sort
Our data allows us to estimate how the private market will segment the 6,983 programs with funding gaps based on gap size and likely underwriting outcomes.
| Tier | Gap Size | Likely Outcome | Programs | Share |
|---|---|---|---|---|
| Fully covered | $0 | No gap; federal cap covers full COA | 350 | 4.8% |
| Approved solo | $1–$10K | Manageable loan amounts; some students qualify without co-signer | 1,268 | 17.3% |
| Approved with co-signer | $10K–$25K | Loan likely requires parental co-signer with verifiable income | 2,813 | 38.4% |
| Approved reluctantly / high rate | $25K–$50K | Large gap; co-signer near-mandatory; rates 10–15% | 1,968 | 26.8% |
| High denial risk | $50K+ | Very large gap; co-signer mandatory; many denials | 934 | 12.7% |
Author's note: The gap-size thresholds and tier labels are modeled categories based on general private lending norms, not observed approval data. Program counts and shares are computed from our dataset. The "Likely Outcome" descriptions are illustrative of how private underwriting typically responds to loan size.
Nearly 78% of all programs fall into tiers where a co-signer is strongly preferred or effectively mandatory. For the 934 programs with gaps exceeding $50,000 (12.7% of the dataset), private lending approval becomes uncertain even with a co-signer.
The 2005 Analogy and Its Limits
Before 2006, graduate students did borrow from private lenders to fill the gap above their federal Stafford limit. The OBBBA reverts to a structurally similar model. But two decades of tuition inflation have changed the math:
- In 2005, the gap between the federal limit ($18,500) and typical graduate COA was measured in single-digit thousands at most programs.
- In 2026, the gap between the federal limit ($20,500) and median graduate COA ($42,808) is $22,308. Even under the higher $50,000 professional cap, the annual gap reaches $35,614 at the median medical school, $49,869 at the median dental school, $93,557 at Stanford Medicine, and $86,216 at Columbia Dentistry. In fact, 59 programs in our dataset have annual gaps exceeding $100,000.