Grad students face strict new limits on federal loan borrowing

(InvestigateTV) — The federal Graduate PLUS Loan program is going away June 30, and graduate students will face new borrowing caps.

Robert Farrington, the founder of The College Investor, said starting July 1 of this year there will be a new direct graduate school loan, and the limits are based on whether you are going to graduate school or professional school.

“Graduate school is typically master’s degree programs and other programs like that, and professional schools are certain designated programs that lead to a professional designation. Typically, we think of doctors, lawyers, dentists, things like that as professional school, things like Master of Education, MBA, Master of Social Work, those are graduate schools,” Farrington said.

Farrington said graduate school borrowing limits will now be $20,500 per year, up to $100,000 total, and professional school will be $50,000 per year up to $200,000 in total.

“These are very strict caps compared to the current system, which was uncapped. A Federal Reserve study just came out in December that shows that about one third of current graduate students would probably borrow beyond those caps based on the cost of their programs," Farrington said.

Farrington said graduate students are going to have to make some tough choices, and it is more important than ever to really understand the return on your education investment.

He said you will want to understand what you can expect to earn after graduation with your chosen degree.

You will also have to think about whether it makes sense to borrow money up to the limits. And if you go beyond, you will be looking at private student loans.