How Many Grad and Professional School Programs Could Close Under New Loan Limits?

The One Big Beautiful Bill Act (OBBBA) has set historically low borrowing limits for graduate and professional school. Here are the limits that kick in starting July 2026 for students who have not borrowed at least one loan for their program before that date:

• Grad school programs: $20,500 per year, or $100,000 aggregate.
• Professional school programs: $50,000 per year, or $200,000 aggregate.

These loan limits will force major closures of graduate and professional school programs across the country. 

We’ll discuss how many might close, why some must close, and how students and prospective students can best protect themselves.

Background: How loan limits changed in the mid-2000s and why it led to an explosion of programs

Consider the following list of numbers of pharmacy schools as a microcosm of what occurred with graduate and professional school programs in the 2000s.

Pharmacy schools by academic year:

• In 2003–2004, there were 43 pharmacy schools.
• By 2006–2007, the number crept up to 47 pharmacy schools.
• Just a few years later, in 2009–2010, it nearly doubled to 86 schools.
• By 2023–2024, there were 142 pharmacy schools nationwide.

What changed in the mid-2000s that caused the number of pharmacy schools to almost double?

Answer: Grad PLUS unlimited borrowing

In the mid-2000s, to advance access in higher education, Congress passed a law that allowed students to access unlimited federal student loans for graduate and professional school.

Some professional programs had higher loan limits available under the Stafford loan program.

But functionally, these Stafford limits didn’t matter, because once students hit their limit, they could access unlimited Grad PLUS.

And even though Grad PLUS has more significant interest and origination fees, because students could pay a percent of their incomes towards their loans, the amount borrowed made little difference in the cost to the student.

Schools realized this, so they dramatically expanded both the number of available programs, but also the rate of increase in their tuition every year.

I recall anecdotally one dental school in particular that let students know they should anticipate a 5% to 6% annual rate of tuition increase, even though that was faster than the rate of inflation.

Schools basically baked in the ability to access unlimited loans and continually increase prices faster than inflation.

What was the only barrier to expanding these programs to infinity? The job market in each given field.

For example, by the 2020s, the acceptance rate for pharmacy school had hit the high 80-percentile range.

The only reason law school enrollment took a hit in the 2010s was due to the job market, for example. 

So, the limiting factor for student enrollment became earning potential and job placements instead of access to capital.

How will graduate programs adapt to the loan limits?

The new loan limitations will impact universities in different ways depending on if it’s a Master’s or professional school program.

Masters programs will face a massive hit

Have you ever been on a train or walked around an urban area and seen ads for a “Master’s in Strategic Management” from a random regional university?

Under the loan regime prior to OBBBA, you could access as much debt as you would want for living expenses and tuition for that one or two year masters program.

Under the new rules, you’re capped at $20,500, which is less than the cost of living expenses to attend such a program.

Some students could access private loans, but the easy money spigot is gone.

With students facing the scrutiny and limitations of private student loan underwriting, many of these highly profitable one  and two year Master’s programs will not be able to continue.

Professional schools cannot be a major profit center anymore

Why does a school like New York University with a multi-billion dollar endowment charge $120,000 a year to attend dental school?

The simple reason is because it could, and the leadership at the university decided this was a desirable way to generate tuition revenue for the university.

Many universities have used professional schools in the past 20 years as a way to subsidize or make money to fund other parts of the university.

But what happens to the NYU dental program (and the other dozens like it) that charge WAY more than the $50,000 per year borrowing limit under the OBBB Act starting for the class entering in fall 2026?

The school would either have to admit exclusively wealthy students who could afford to pay $120,000 a year + $50,000 of living expenses in New York City, or it would have to find private lenders that would agree to fund the six figure annual gap in the cost of attending NYU with the amount of loans the federal government would provide.

When the average new dentist makes $120,000 to $180,000 a year, virtually no private lender would agree to fund that high of a dollar amount.

That means the program would need to either dramatically reduce its tuition to an amount that private lenders would agree to underwrite, or the school would have to lend out of its endowment fund at an interest rate that would cover the risk it wouldn’t be paid back, or the school would have to admit exclusively wealthy students.

But what’s clear is that professional schools cannot be a no brainer profit center anymore under the new loan rules.

My projection for grad and professional school closures under the OBBB Act

In the same way that the increase in the number of pharmacy schools was gradual after the loan limits changed following the introduction of Grad PLUS, I believe the closure of grad and professional school programs will also be gradual.

Many schools have decent reserve funds in place, and some faculty and staff have to receive a minimum amount of notice to be able to be laid off.

Using the pharmacy school numbers as an example again, if there were 43 schools in 2003, and there are 142 today, a reasonable estimate would be 40% to 60% contraction. My educated guess is 50%.

That would put the total number of pharmacy schools at 71, but think what that would mean.

We might see 20 to 30 schools close in the first year. Then, the rate of school closures would get slower with each additional year (perhaps 10 to 15 in the second and third year, and 5 to 10 in the fourth and fifth year).

Such a pattern might play out across a number of graduate and professional school categories.

The acceptance rate for these grad and professional school programs will decline as only the most financially viable programs will be allowed to exist due to market based pricing pressure. This will mostly come from students who cannot access private student loan funds because the lenders will refuse to provide capital in many cases to students with high projected debt to income ratios.

Many grad and professional schools will then be forced into price competition with peer universities to attract students. Some schools will be able to swing this, while others will be too financially constrained and will have to downsize their programs or close entirely.

Which schools are the most likely to survive the OBBB Act loan limits?

Here are the types of schools I expect to survive after the OBBB loan limits go into place in large numbers:

1. In-state public schools supported by taxpayers.
2. Schools that existed prior to 2006 when the graduate loan limit expansion drew new programs into the market that wouldn’t have existed otherwise.

Why are schools that existed pre-2006 much safer than those who came about after 2006?

The simple reason is that those programs proved they could survive in a prior era with loan limits and limited access for students to capital.

The schools that have come into existence after 2006 have never had to show that, and many of these programs will face so much pressure that they will close or downsize.

How students can protect themselves from the disruption coming due to new OBBB loan limits

The coming changes to graduate and professional school financing will affect students differently depending on where they are in their program.

If you’re already enrolled

If you’re currently enrolled, you’re much better off than the students who will be applying next fall. This is because the schools might opt to gradually close down programs rather than immediately cease operations.

In the unlikely event that your school did close, you would want to be aware of transfer opportunities and rules regarding the transferability of credit hours.

Keep in mind that if you’re facing program instability that’s also impacting thousands of fellow students across your field, you will not be alone in case you face any difficulty in completing your degree.

Closed school discharge is still a thing, but that only impacts federal student loans, not private.

If you’re planning to enroll

Since students can access unlimited borrowing for up to three years after July 2026 if they borrowed at least one loan for their program prior to that date, students will not be economically devastated compared to students who borrow significant amounts of private student loans whose programs close.

Again it’s speculation to assume that schools would admit students then cease operations shortly after, but there’s no precedent for what’s about to occur in the graduate and professional school space by which to make a safe prediction.

What to watch for from schools

In my conversations with higher ed professionals, no one seems to have a plan for what’s coming.

From what I’ve seen, schools are not proactively discussing cutting tuition and fees.

What’s more likely is that schools will keep tuition and fees relatively unchanged going into the fall 2026 season.

And the shock will come when the financial aid award letters go out and students cannot access capital, which results in a fraction of the anticipated yield of students going to these programs.

Grad and professional schools long accustomed to full class sizes will face an acute funding crisis when only half of the anticipated student count decides to matriculate, and some of these schools will make an effort at staying open on a leaner budget.

But many will conclude that their fixed expenses and cash burn is too high to maintain. The choice for many programs will be between offering fewer seats at a higher price point or a closure of their professional or graduate program if profitability cannot be achieved due to high fixed costs of the university.

How school closures could affect you

Programs in high cost of living areas will be most heavily impacted by these loan limit changes.

It costs $50,000 a year in living expenses to attend dental school in New York City, but perhaps only $20,000 a year to attend dental school in small town Iowa.

Using this dental school example more broadly, many programs in higher cost coastal states will face a bigger financial hurdle to stay open in this new era of price competition being forced by the OBBB Act.

Student Loan Planner is working on how to help graduate and professional degree students. If you happen to be a financial aid professional or a prospective professional degree student, feel free to reply to our email list updates to share what you’re worried about with these coming changes to higher education financing.