How to Find Free Money for Graduate School as Loans Tighten

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For years, paying for graduate school followed a predictable pattern: Borrow what you need and deal with repayment later. Federal Grad PLUS loans made that possible by allowing students to cover nearly the full cost of attendance after other aid was applied.

According to the Education Data Initiative, in 2025 the average outstanding balance on a Federal Grad PLUS loan stood at about $66,000, which underscores how central these loans have been to graduate financing.

That model is changing.

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Beginning July 1, 2026, new graduate students will no longer have access to Grad PLUS loans. Federal borrowing will instead be governed by annual and lifetime limits, with caps determined by whether a student is enrolled in a professional degree program or another type of graduate program.

For many students, especially those in high-cost programs, federal loans may no longer cover the full cost of earning an advanced degree.

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The author of this article is a participant in Kiplinger's Adviser Intel program, a curated network of trusted financial professionals who share expert insights on wealth building and preservation. Contributors, including fiduciary financial planners, wealth managers, CEOs and attorneys, provide actionable advice about retirement planning, estate planning, tax strategies and more. Experts are invited to contribute and do not pay to be included, so you can trust their advice is honest and valuable.

This shift matters most for programs with high upfront cost structures, including degrees commonly associated with medical school funding, law school funding and other advanced career pathways where students often assume federal loans will fill any remaining gaps.

In 2026 and beyond, that assumption becomes far less reliable.

Graduate school remains attainable, but the financing strategy must evolve. As Grad PLUS ends, scholarships, assistantships and other forms of "free money" should become the foundation of a funding plan, not an afterthought.

A new borrowing framework for graduate students in 2026

Starting with students who borrow for the first time in the 2026–27 academic year, federal graduate loans will follow a two-tier structure:

Non-professional graduate programs (including most master's degrees):

Annual limit: $20,500 in Direct Unsubsidized Loans
Lifetime graduate aggregate limit: $100,000

Professional degree programs (such as medicine, law and dentistry):

Annual limit: $50,000 in Direct Unsubsidized Loans
Lifetime graduate aggregate limit: $200,000

In addition, an overall lifetime federal loan cap of $257,500 applies across undergraduate and graduate borrowing combined.

Students and families should act early by:

Confirming how their program is classified with the financial aid office
Requesting clarity on annual and lifetime borrowing limits specific to that program

Doing this upfront helps avoid unexpected funding shortfalls later in the program.

What counts as a professional graduate degree?

This is where many families get tripped up.

Under federal aid rules, professional graduate programs are narrowly defined. They generally include doctoral-level degrees that lead directly to entry into regulated professions, such as medicine (MD or DO), law (JD), dentistry, pharmacy, veterinary medicine, optometry, podiatry, chiropractic care, theology and clinical psychology.

Importantly, career outcomes do not determine classification. A program's federal status is defined by U.S. Department of Education rules — not by earning potential, licensure requirements or job demand.

As a result, some high-cost, career-focused degrees may not qualify for professional-level loan limits.

Classifications are set through federal student aid regulations and reflected in the Classification of Instructional Programs (CIP) codes used in federal reporting.

Universities may also signal distinctions in their catalogs, often separating professional schools (such as law or medical schools) from graduate schools of arts and sciences.

The key takeaway: Do not assume a program is treated as professional for federal aid purposes.

Students should confirm classification directly with their financial aid office and plan accordingly, especially in high-cost programs where borrowing limits may not align with total expenses.

Why funding gaps will become more common

Graduate borrowing has increased steadily over the past two decades. While graduate students make up a smaller share of borrowers, they hold a disproportionate share of outstanding federal student loan debt.

That imbalance has led policymakers to impose borrowing caps to limit government risk and promote more sustainable lending.

For students, the result is clear: Funding gaps are more likely — particularly in programs with high tuition, unpaid clinicals or internships, or limited ability to work while enrolled.

These gaps extend beyond tuition. Housing, transportation, exam fees, equipment, childcare and licensing costs all add pressure as borrowing options narrow and private loans become the fallback.

Start with the funding gap, not the loan amount

With borrowing now capped, planning should begin by identifying the true funding gap, not by maximizing loan eligibility.

The funding gap is the difference between these two things:

Total cost of attendance (direct and indirect)
All non-loan resources available to the students

Many students focus only on tuition. Including living expenses and program-specific costs often reveals a much larger gap, especially in high-cost graduate programs that are not classified as professional.

Students should:

Calculate their full funding gap early, including living expenses
Actively pursue scholarships, assistantships, employer benefits and other non-loan resources first
Turn to federal or private loans only after non-repayable options are exhausted

Where 'free money' fits into the new reality

Free money rarely comes from a single source. It is built over time.

Departmental scholarships and fellowships remain among the most effective and most overlooked options.

Regular conversations with faculty, monitoring departmental announcements and engaging in academic or research groups can uncover funding opportunities that are not widely advertised.

Graduate assistantships are another cornerstone. Teaching and research roles often provide stipends, tuition reductions and health insurance, significantly reducing reliance on borrowing.

A stipend that offsets living costs can lower future debt more effectively than taking out additional loans.

Employer tuition assistance is also increasingly important, particularly for working professionals. Even partial reimbursement can materially improve affordability when applied over multiple terms.

Professional associations and workforce-based programs offer additional funding that many students overlook because it is not labeled as traditional financial aid.

Addressing funding gaps in real time

As borrowing limits tighten, timing matters as much as total cost. Many scholarships are awarded annually, while graduate students often experience month-to-month cash-flow challenges.

To help address this issue, Edvisors recently launched a $3,000 monthly scholarship for graduate students, awarded on a rolling basis to help offset funding gaps as they arise.

The scholarship is designed to complement, not replace, institutional aid and assistantships. More information is available at Edvisors.com. (Note: I am the chief marketing officer of Edvisors.)

Tax benefits also warrant attention. Credits such as the Lifetime Learning Credit may not reduce upfront costs, but they can lower total out-of-pocket expenses and function as another form of free money.

What students' advisers should watch closely

Program classification is now a central planning factor, not a footnote
Timing matters — students who borrow before July 2026 may face different rules than those who begin after
Competition for scholarships will intensify as borrowing caps push more students toward non-loan funding

This is especially relevant for advisers working with students pursuing degrees such as medicine or law, where perceived program status may not align with federal aid classifications.

The bottom line

Graduate school financing in 2026 will require greater intention and less reliance on automatic borrowing.

Students who succeed will verify program classification early, understand borrowing limits, calculate their true funding gap and build a strategy that treats scholarships and other free money as essential — not optional.

For advisers, the role is clear: Help students confirm classifications, model borrowing limits accurately, identify funding gaps early and prioritize non-loan resources as a core part of graduate education planning.

Disclaimer

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

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Sravani Atluri serves as the Chief Marketing Officer of Edvisors, overseeing marketing, product strategy and cross-functional growth across the company. She brings more than 20 years of experience across e-commerce, fintech, health care and early-stage ventures, where she has led teams, launched new products and built data-driven marketing strategies that deliver measurable impact.