States Rush to Fill Graduate Loan Gap Opened by G.O.P. Budget Bill

States are stepping in to help graduate students finance their studies now that federal Graduate PLUS loans have been eliminated for new borrowers.Minnesota and Connecticut are among the states that have announced expansions of their student loan programs as of July 1 to fill the financing shortfall for graduate borrowers.“We see it as a substitute program, to fill the financial gap,” said Josh Hurlock, deputy director of the quasi-public Connecticut Higher Education Supplemental Loan Authority.Without the state programs, some graduate students would have no alternative besides taking out private student loans from banks and other lenders.

But private loans can be riskier than federal loans because they generally don’t have the same protections, like the ability to pause loan payments during a financial setback, to cancel loans for public-service work and to repay loans on a plan tied to a borrower’s income.Students, however, should carefully review terms for state graduate loans, just as they would when borrowing from private lenders, experts say.State loan programs set their own rules and don’t necessarily offer the same benefits that federal loans do.

“Borrowers shouldn’t assume they’re the equivalent of a federal loan,” said Tiara Moultrie, a fellow focusing on higher education at the Century Foundation, a progressive think tank.Before the Graduate PLUS program was curtailed, graduate and professional students could first max out borrowing from the federal Stafford loan program — generally, up to $20,500 per academic year, up to a total of $138,500 (limits were higher for some programs).Then, if they still needed more funding to pay for their studies, they could borrow Graduate PLUS loans, up to their school’s full cost of attendance.Just 16 percent of graduate students borrowed under the Graduate PLUS program, but they accounted for almost a third of federal dollars lent to graduate students in 2023, and that share was expected to grow ...