How to Pay for Grad School: A Cost-Ranked Guide for 2026
Paying for grad school changed on July 1, 2026. The Grad PLUS loan program, which used to let graduate and professional students borrow up to their full cost of attendance, stopped accepting new borrowers that day under the One Big Beautiful Bill Act.
This guide ranks every real funding source by cost — free money first, then the new federal loan caps, then private loans — so you borrow the least amount possible for the degree you're paying for. For how the new repayment rules affect the loans you do take out, see our Tiered Standard Repayment Plan guide.
Start with free money: fellowships, assistantships, and grants
A fellowship pays you a stipend to study, with no work obligation attached, and is usually the most competitive but also the cheapest option since you owe nothing back. A graduate or teaching assistantship trades part-time work — teaching a section, grading, or running a lab — for a tuition waiver plus a stipend, and is far more common than a pure fellowship at most research universities.
Department-level grants and need-based aid fill some of the remaining gap for many programs, particularly in the sciences. Apply directly through the graduate program's financial aid or graduate school office, not just the general FAFSA process, since many of these awards are program-specific and have their own deadlines separate from federal aid.
What actually changed: Grad PLUS loans end July 1, 2026
Under the One Big Beautiful Bill Act, the Grad PLUS loan program stopped issuing new loans to new borrowers as of July 1, 2026. Before that date, Grad PLUS let graduate and professional students borrow up to their full cost of attendance with no hard dollar cap, which is why its removal is the single biggest change to how grad school gets financed federally in over a decade.
In its place, Direct Unsubsidized Loans now carry fixed annual and lifetime caps by student type: general graduate students can borrow up to $20,500 a year with a $100,000 aggregate limit, while professional students (medicine, law, dentistry, and similar programs) can borrow up to $50,000 a year with a $200,000 aggregate limit. A combined lifetime cap of $257,500 across all federal student loans applies on top of those program-specific limits. If you already had a Direct Loan or Grad PLUS loan for your current program before July 1, 2026, a legacy provision generally lets you keep borrowing under the old rules for up to three more years or until you finish that specific program, whichever comes first.
Filling the gap: private graduate loans
Once you've maxed out your federal unsubsidized loan cap for the year, the only borrowing options left are private lender loans, which are credit-based (often requiring a co-signer without an established credit history) and carry none of the borrower protections federal loans do — no income-driven repayment, no Public Service Loan Forgiveness eligibility, and no guaranteed deferment options.
Given the new $100,000 / $200,000 federal caps, more students than before will need to fill a gap with private loans, especially in high-cost professional programs. Shop rates across multiple lenders before committing, since private-loan rates vary widely by credit profile and lender, unlike the fixed rate every borrower gets on a federal loan.
Work through it: part-time work and employer tuition assistance
Working part-time while studying reduces how much you need to borrow overall, though it stretches out how long the degree takes to finish. Some employers offer tuition assistance as a benefit; under IRS Section 127, an employer can pay up to $5,250 a year toward your education tax-free to you, and that benefit now also covers principal and interest payments on existing student loans, not just new tuition.
If your employer offers this benefit, it's effectively free money on top of your salary — confirm the exact program terms with HR, since a Section 127 plan must be offered to employees on a nondiscriminatory basis and usually requires enrollment before the semester starts, not after you've already paid.
Should you wait and save first?
Delaying enrollment by a year or two to save cash and pay down existing debt lowers how much you need to borrow, and can also strengthen a fellowship or assistantship application if you use the time to gain relevant research or work experience. This trade-off is worth running seriously against the new $100,000 / $200,000 federal caps: a student who would have covered a $150,000 program entirely with Grad PLUS now needs either savings, private debt, or both to close that same gap.
Run your own numbers with our budget calculator before deciding, factoring in both the cost of waiting (lost earning years with the advanced degree) and the cost of borrowing more under the new caps.
Fellowship vs. assistantship vs. loans, side by side
A fellowship costs you nothing and comes with no repayment obligation, which is exactly why it's the most competitive option to win. An assistantship also costs nothing in cash, but the repayment obligation is your time — teaching or research hours — instead of money, and it's more attainable than a pure fellowship at most research programs.
A federal unsubsidized loan, now capped at $20,500 to $50,000 a year depending on your program type, is interest-bearing and comes with a fixed monthly payment or an income-driven repayment option once you graduate — but you must qualify under standard federal aid eligibility rules to access it. A private loan is also interest-bearing, at a credit-based rate, with a fixed monthly payment and no income-driven option, and approval depends entirely on your (or a co-signer's) credit profile.
Verdict: exhaust fellowships and assistantships first, use federal unsubsidized loans up to the new caps next, and treat private loans as the last resort for whatever gap remains — in that order, every time.
Frequently asked questions
Are Grad PLUS loans really gone?
Yes, for new borrowers. The Grad PLUS program stopped issuing new loans as of July 1, 2026, under the One Big Beautiful Bill Act. If you already had a Grad PLUS or Direct Loan for your current program before that date, a legacy provision generally lets you keep borrowing under the old rules for up to three more years or until you finish that program.
How much can I now borrow federally for grad school?
General graduate students can borrow up to $20,500 a year in Direct Unsubsidized Loans, with a $100,000 aggregate limit. Professional students (medicine, law, dentistry, and similar) can borrow up to $50,000 a year, with a $200,000 aggregate limit. A combined lifetime cap of $257,500 applies across all federal student loans.
What if I already have a Grad PLUS loan from before July 1, 2026?
You're generally covered by the legacy provision as long as you stay in the same program at the same school where you first borrowed before July 1, 2026. That lets you continue borrowing Grad PLUS for up to three more years or until you finish the program, whichever comes first.
Is employer tuition assistance taxable?
Up to $5,250 a year is tax-free to you under IRS Section 127, covering tuition, fees, books, and now also student loan principal and interest payments. Anything your employer pays above that annual limit is generally taxable as income.
What's the difference between a fellowship and an assistantship?
A fellowship pays a stipend with no work requirement attached, making it the most competitive but least obligated option. An assistantship trades part-time work, like teaching or research, for a tuition waiver plus a stipend, and is more widely available than a pure fellowship.
Should I take out private loans for grad school?
Only after exhausting fellowships, assistantships, and your federal unsubsidized loan cap. Private loans are credit-based, don't offer income-driven repayment or Public Service Loan Forgiveness eligibility, and should be treated as the last resort for whatever funding gap remains.
Sources
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