How Caps Threaten Access ISSUE BRIEF:
In 1965, Congress passed the Higher Education Act (HEA), expanding federal student loan programs to increase access to higher education. Without this investment to expand access to all students seeking to advance their education, the United States would be a country where only the privileged few would have access to the full range of educational options offered. Over the past six decades, these programs have remained largely true to this original purpose. However, as more students pursue higher education and costs continue to rise, federal student loan disbursements have grown significantly, particularly for graduate and professional students.
Notably, between July 2021 and June 2022, the U.S. Department of Education (ED) disbursed the highest share of federal loans in history to graduate and professional students — 47% . This rise in borrowing has intensified concerns about federal spending on higher education. After years of policymakers introducing proposals to cap graduate and professional loans, citing the perception that programs like the Graduate PLUS (Grad PLUS) Loan Program offer “unlimited” federal funding, Congress passed the One Big Beautiful Bill Act (OBBBA) in 2025, which sets hard caps on federal student loans for graduate and professional students.
However, this perception overlooks important safeguards already in place. Unlike the Direct Unsubsidized Loan Program, which has a fixed annual borrowing limit of $20,500, Grad PLUS Loans are capped at the cost of attendance (COA), minus other financial aid. This includes not only tuition and fees but also essential living expenses such as housing, food, and transportation. Thus, borrowers do not have unrestricted access to Grad PLUS funds; they formally request federal funds, limited to the demonstrated amount necessary to pursue their degree successfully.
While it is true that the increase in graduate and professional student borrowing warrants careful consideration, this issue brief highlights why sustained investment in federal graduate student loan programs is a strategic investment in human capital and the nation’s economic future. Federal student loans play an important role in providing access to graduate education, and the benefits gained are not just to the individual but to the larger society that their degree enables them to serve. Capping federal student loans will undermine access, thereby restricting entry into critical professions essential to our nation’s well-being, such as healthcare, education, and legal services.
Understanding the Relationship Between Graduate and Professional Loans and Tuition Increases
Over the past decade, graduate and professional tuition has steadily increased across all major degree categories. As shown in Figure 1, average in-state tuition and fees (adjusted to 2024 dollars) rose consistently between 2014 and 2023. Medical programs experienced the most significant increase, climbing from $35,492 in 2014 to $42,801 in 2023. Law school tuition also rose from $31,680 to $38,172 over the same period. Meanwhile, the average for all graduate and professional programs increased from $14,049 to $16,647
Figure 1: Average In-State Tuition and Fees (in 2024 Dollars) by Graduate Degree Program, 2014-2023
Note: The data is rounded to the nearest whole number.
In Figure 2, the average borrowing amounts by graduate degree program from 2014 to 2023 for out-of-state students reveal the same consistent upward trend across all categories. Medical students, who have historically borrowed the most, had loan amounts that rose from $49,574 in 2014 to $56,130 in 2023. Law students also saw a steady increase, from $36,407 to $42,963 over the same period and borrowing among students in all graduate and professional programs rose more modestly, from $16,736 to $19,420
Figure 2: Average Out-of-State Tuition and Fees (in 2024 Dollars) by Graduate Degree Program, 2014-2023
Note: The data is rounded to the nearest whole number.
Source:
Proponents of capping federal graduate and professional loan programs have argued that allowing students to borrow up to the COA enables institutions to artificially increase tuition prices — a concept known as the Bennett Hypothesis 1
Introduced in a 1987 New York Times op-ed by William J. Bennett, former U.S. Secretary of Education under the Reagan Administration, the hypothesis proposes that the federal government disrupted the free market by guaranteeing students access to federal student loans, allowing institutions to raise tuition beyond what a competitive market would sustain. Bennett proposed restricting federal student loan programs to encourage private lenders to re-enter the market and pressure higher education institutions to lower tuition to remain competitive.
Yet, research suggests that the Bennett Hypothesis is circumstantial. Generally, the relationship between federal loan availability and tuition increases varies based on aid structure and institutional types. 2 Regarding Grad PLUS Loans specifically, research has also been inconclusive regarding the relationship between loan availability and tuition increases. 3 Research into whether law schools increased tuition in response to the creation of the Grad PLUS Loan Program
found a lack of strong empirical support for the Bennett Hypothesis4 , while a study looking at whether business schools and medical schools increased tuition found little consistent evidence to support the Bennett Hypothesis 5 Meanwhile, among programs where a larger share of graduate students exhausted their annual federal loan eligibility before the introduction of the Grad PLUS Loan Program, federal borrowing and prices increased.6
Conflicting research challenges the assumption that restricting federal graduate student loans would meaningfully reduce tuition. Instead, these findings suggest that other institutional factors, such as greater operating expenses and investment in infrastructure, may be driving tuition increases.
Furthermore, because the COA extends beyond tuition, the overall growth in graduate and professional student borrowing may be driven by the need to cover tuition and rising essential living expenses, such as housing and food, at a time when these expenses are becoming more expensive due to inflation and economic policies.
Trends in Recent Graduate and Professional Student Federal Loan Borrowing
Given that research on the relationship between federal graduate student loan availability and tuition increases is widely inconsistent, capping or eliminating the program under the assumption that it would broadly reduce the cost of college is not supported by clear evidence. What remains at stake is access to advanced education programs, particularly for underrepresented and low-income areas, that serve as pathways to professions integral to communities across the country, such as health professionals in rural areas and legal aid attorneys in underserved neighborhoods. A closer examination of trends in graduate borrowing underscores this risk.
In Figure 3, the racial disparities in graduate student debt are strikingly clear. Between 2000 and 2020, the percentage of graduate students holding $100,000 or more in federal student debt increased across all racial groups — but the growth was most pronounced among Black borrowers. By 2020, 13% of Black graduate and professional students carried six-figure debt from their graduate education alone, compared to lower but still rising percentages among White and Hispanic students
Figure 3: Students with $100,000+ in Federal Graduate Student Loan Debt By Race and Ethnicity
Source: U.S. Department of Education, National Center for Education Statistics, National Postsecondary Student Aid Study: 20002020 Graduate Students (NPSAS:GR)
This data underscores the disproportionate financial burden faced by Black students in particular and highlights how federal graduate loan programs serve as a critical access point for historically underrepresented communities. Any policy changes that restrict borrowing without addressing underlying systemic barriers risk exacerbating existing inequities and limiting pathways to advanced education for students of color.
Table 1: Percentage of Graduate Students that Applied for Federal Aid by Degree Program, 2019-20 7
Source: U.S. Department of Education, Institute of Education Sciences, National Center for Education Statistics, 2020 National Postsecondary Student Aid Study (NPSAS). Retrieved from NCES.ED.gov/DataLab/
But reliance on federal student loans for advanced degrees pays off not just for the individual, but for society as a whole. Advanced degree holders tend to have significantly lower unemployment rates than those who hold only a bachelor’s degree or less. 8
And, over time, those who hold an advanced degree are likely to earn 50 to 100% more than those with less formal education.9 The federal government, and the broader society, also benefit from this earnings premium. With a more highly educated tax base, the federal government can collect increased tax revenue from individuals who tend to earn more.10 These additional tax revenues are, in turn, used to fund federal programs that provide direct aid to millions of Americans (e.g., healthcare subsidies, mortgage assistance, workforce training, Federal Pell Grants, etc.).
Legislative Context and Considerations
Over the past decade, lawmakers have introduced multiple legislative proposals aimed at capping federal graduate and professional student loans. In 2017, the Promoting Real Opportunity, Success, and Prosperity through Education Reform (PROSPER) Act was introduced which would have eliminated Grad PLUS Loans and imposed firm annual and aggregate borrowing limits for graduate and professional students, signaling a shift toward a more restrictive federal aid structure. In 2022, the Responsible Education Assistance through Loan (REAL) Reforms Act was introduced which also sought to eliminate the Grad PLUS Loan Program and cap graduate and professional student borrowing at $25,000 annually and $100,000 in the aggregate. Finally, in 2024, the College Cost Reduction Act (CCRA) was introduced, proposing to eliminate the Grad PLUS Program and cap graduate student loans at $100,000 and professional program loans at $150,000 in the aggregate. Though unsuccessful, these proposals reflected growing concerns from some policymakers over rising student debt and federal expenditures.
In 2025, with an aim to extend tax cuts from the 2017 Tax Cuts and Jobs Act, Congress passed the One Big Beautiful Bill Act (OBBBA), a budget reconciliation bill that included sweeping changes to federal student loan policy – changes that had been foreshadowed in previous proposals. Specifically, OBBBA imposed annual caps of $20,500 for graduate students and $50,000 for professional students, aggregate caps of $100,000 for graduate students and $200,000 for professional students, and a lifetime cap of $257,500. While proponents argue that these loan limits will curb what they view as excessive borrowing and slow tuition increases, opponents warn they will disproportionately affect students from underrepresented backgrounds and limit access to advanced degrees in high-need fields. This policy change raises significant questions about access, equity, and the long-term implications for the nation’s workforce.
Implications for Graduate Education, the Workforce, and Beyond
The implications of capping federal graduate and professional student loan programs are profound. These changes risk exacerbating existing disparities in access to advanced education, particularly for students from historically underrepresented racial, ethnic, and socioeconomic backgrounds. Federal loan programs like Grad PLUS have long served as a critical equalizer, enabling students without generational wealth or access to private credit to pursue graduate degrees. Under OBBBA, borrowing caps fall well below the actual COA for many programs, effectively pricing out students who rely on federal aid to bridge the gap.
OBBBA requires that professional students be limited to $50,000 annually in federal student loans, which for many law students would not be sufficient to cover each year of their J.D. program. Data from the American Bar Association show that the national median cost of attendance for J.D. programs in 2024 was approximately $79,000.11 It’s also important to note that the funding cap in OBBBA is a static figure that will stay the same unless Congress legislates an increase. This means that as the loan limit stays constant and COA increases due to inflation and other rising costs, fewer students each year will be able to fully finance their law degrees using federal student loans.
Students without other financial support could try to get a private loan, but the private market is an inadequate substitute for federal funding. While some students may fare well in the private market, others would not be able to get a loan or would only be offered one with high interest rates and fees. This is because private lenders have stringent underwriting standards that consider debt-to-income ratios when making lending decisions. Additionally, students who enroll in a program that incurs high debt, but plan to enter a lower-paying public service career, may also have a hard time getting a private loan. Finally, private loans are not eligible for federal benefits such as income-driven repayment (IDR) plans and Public Service Loan Forgiveness (PSLF), making repayment harder and more expensive for borrowers least able to afford it.
These consequences also extend into the workforce, particularly in fields like law and medicine that require advanced degrees. According to the American Bar Association, 79% of lawyers identified as White, while only 5% identify as Black or African American, 6% as Hispanic, and 6% as Asian.12 These figures stand in stark contrast to the broader U.S. population and reflect persistent barriers to entry for traditionally underrepresented groups.
In law firms, diversity remains limited: In 2022, just 11.4% of attorneys at major firms were partners of color.13 The federal judiciary also reflects these disparities, with 76% of judges identifying as White and only 18.8% as Black or Hispanic.14 By
restricting access to the financial resources needed to enter these professions, OBBBA risks entrenching these inequities and narrowing the pipeline of diverse talent essential to a representative and effective legal system.
Conclusion
For the last 60 years, HEA has aimed to expand educational opportunities and promote upward mobility for low-income students. Federal student loan programs have played a critical role in fulfilling that mission by enabling students from all backgrounds to pursue advanced degrees. These programs have helped diversify the nation’s professional workforce, strengthened public service pipelines, and fueled innovation and economic growth.
The loan caps set forth in OBBBA risk undermining these efforts. While concerns about rising student debt and federal spending are valid, the evidence does not support the assumption that restricting access to federal loans will meaningfully reduce costs. Instead, such policies will disproportionately harm students from historically underrepresented and low-income backgrounds, limiting their access to high-cost, high-return fields like law and medicine.
Fostering a competitive, inclusive, and equitable workforce by preserving robust federal graduate lending is not just a matter of educational access, it is a strategic investment in the nation’s civic and economic infrastructure.
Endnotes
1. Richard Pallardy, “History of Student Loans: The Bennett Hypothesis,” Saving for College, March 11, 2022. Available at: https://www.savingforcollege.com/article/history-of-student-loans-the-bennett-hypothesis
2. Study finds no evidence that public universities increase their in-state or out-of-state tuition levels in response to increased federal or state financial aid for students. (Source: Rizzo and Ehrenberg (2003). “Resident and Nonresident Tuition and Enrollment at Flagship State Universities” National Bureau of Economic Research. Retrieved from https://www.nber.org/ system/files/working_papers/w9516/w9516.pdf)
3. Study finds some relationship to a variant of the “Bennett hypothesis” that aid-eligible for-profit institutions capture a large part of the federal student aid subsidy. (Source: Cellini, Riegg, Goldin. (2014). “Does Federal Student Aid Raise Tuition? New Evidence on For-Profit Colleges.” American Economic Journal: Economic Policy. Retrieved from: https://dash.harvard. edu/server/api/core/bitstreams/7312037d-e4d9-6bd4-e053-0100007fdf3b/content
4. Kelchen, R. (2019). “An Empirical Examination of the Bennett Hypothesis in Law School Prices.” Economics of Education Review. Retrieved from https://robertkelchen.com/wp-content/uploads/2019/07/kelchen_law_bennett_prepub.pdf
5. Kelchen, R. (2018). “Does the Bennett Hypothesis Hold in Professional Education? An Empirical Analysis.” Retrieved from https://www.airweb.org/docs/default-source/default-document-library/kelchenscholarlypaper2.pdf
6. Black, Turner, & Denning (2023). “Plus or Minus? The Effect of Graduate School Loans on Access, Attainment, & Prices?” National Bureau of Economic Research. Retrieved from https://www.nber.org/system/files/working_papers/w31291/ w31291.pdf
7. Note. Master’s degrees include the Master of Science (M.S.), Master of Arts (M.A.), Master of Education (M.Ed.) or Teaching (M.T.), Master of Business Administration (M.B.A.), Master of Public Administration or Policy (M.P.A., M.P.P), Master of Social Work (M.S.W), Master of Fine Arts (M.F.A), Master of Public Health (M.P.H), and other master’s-level degrees. Doctoral degrees include the Doctor of Philosophy (Ph.D.), Doctor of Education (Ed.D.), Doctor of Science or Engineering (Sc.D., Eng.D.), Doctor of Psychology (Psy.D.), Doctor of Business or Public Administration (D.B.A., D.P.A.), Doctor of Fine Arts (D.F.A.), Doctor of Theology (Th.D.), other research doctoral degrees, and other professional practice doctorates. Law degrees include the Bachelor of Laws (LLB) and JurisDoctor (JD). Medical degrees include the Doctor of Medicine (M.D.) and Doctor of Osteopathic Medicine (D.O.). Other medical degrees include Doctor of Dental Surgery (D.D.S.), Doctor of Dental Medicine (D.M.D.), Doctor of Chiropractic (D.C.), Doctor of Pharmacy (Pharm.D.), Doctor of Optometry (O.D.), Doctor of Podiatric Medicine (D.P.M.), and Doctor of Veterinary Medicine (D.V.M.). The data is filtered by citizenship status, including United States citizens, permanent residents, and other eligible non-citizens, who qualify for federal financial aid.
8. U.S. Department of Labor, U.S. Bureau of Labor Statistics, (2024) Current Population Survey, Retrieved from Education pays: U.S. Bureau of Labor Statistics
9. Anthony P. Carnevale et al., The College Payoff: Education, Occupations, Lifetime Earnings, Georgetown University Center on Education and the Workforce, 2011, https://cew.georgetown.edu/cew-reports/the-college-payoff/
10. Under America’s progressive taxation system, higher earners pay more individual federal income tax. Also, as a share of all federal income taxes paid in 2015, higher earners (those earning over $100,000 per annum) paid most (over 80 percent) of the federal income tax in the country. Internal Revenue Service, Publication 505: Tax Withholding and Estimated Tax, 2018, https://www.irs.gov/pub/irs-pdf/p505.pdf
11. American Bar Association, 2024. Compilation – All Schools Data. Section of Legal Education – ABA Required Disclosures. Analysis of full-time, non-resident cost of attendance by AccessLex Institute.
12. Ibid.
13. American Bar Association, Profile of the Legal Profession 2023, Section of Legal Education and Admissions to the Bar. Available at: https://www.americanbar.org/content/dam/aba/administrative/news/2023/potlp-2023.pdf
14. Ibid.
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