Our last issue, Jewish Life at Penn: Insights from the 2025 Undergraduate Survey was featured in The Daily Pennsylvanian and the Anti-Defamation League (ADL) newsletter this week.
The Key — New Federal Loan Caps Put Pressure on Penn's Graduate Education
Beginning in July of 2026, unlimited federal graduate students loans covering up to the full cost of attendance will end. In their place, the government is introducing a new system of more restrictive loans, capping “professional” degree programs at $200,000 in lifetime borrowing and “graduate” programs at $100,000.
For Penn and many peers, these changes could threaten existing revenue models, reduce enrollment, precipitate changes to tuition prices and aid structures, and push students toward more expensive private loans.
Last month, the federal government released the new degree classification system. Graduate programs are now categorized as either “professional” or “graduate” degrees, with much higher loan limits reserved for a narrow set of professional programs.
Medicine, law, veterinary medicine, dentistry, and a handful of other programs were classified as professional degrees. Other high-need graduate programs like nursing and education were not.
The media erupted in discussion. Critics say the new classifications and limited borrowing will worsen the nursing shortage, discourage students from pursuing certain degrees that are important to society, and drive up borrowing costs by funneling students to private loan markets with higher interest rates.
Meanwhile, the federal government says that caps will pressure universities to lower costs and protect students from taking on crippling debt to pay for degrees with low expected earnings.
For Penn, this means for many non-PhD programs, total costs now exceed the new federal caps. That could change who can afford to attend, how students finance their degrees, and how programs compete for talent.
The era of unlimited borrowing
Until the passage of the One Big Beautiful Bill Act (OBBBA), U.S. citizens and permanent residents could borrow up to their full cost of attendance for graduate school through Grad PLUS. This long-controversial system is changing in July.
Supporters saw Grad PLUS as a necessary access tool that prevented graduate students from being priced out or turning to costly private loans. Critics saw it as a blank check that enabled tuition to rise alongside available borrowing, saddling students with unnecessary debt.
More than 440,000 American graduate students borrow under Grad PLUS annually. While graduate students are only 21% of all federal student loan borrowers, their debt accounts for about half of all annual student loan dollars.
One study of graduate students at public and private universities in Texas found that the availability of unlimited loans led to higher graduate program prices and had no significant impact on access to, or completion of, graduate education.
In short, the study found the sticker price of programs was simply increasing alongside the availability of government loans.
The new rules of “professional” vs. “graduate” loan limits
Federal officials have described the end of Grad PLUS as a response to rising graduate program costs and the almost $1 trillion dollars in outstanding federal graduate student loans. Separately, the Congressional Budget Office has projected that Congress could save $40 billion through 2035 by improving Grad PLUS.
Under the new system, “graduate” students can borrow up to $20,500 yearly, with a $100,000 lifetime limit, and “professional” students can borrow up to $50,000 yearly, with a $200,000 lifetime limit.
The professional degrees are medicine (M.D.)*, dentistry (D.D.S., D.M.S.)*, veterinary medicine (D.V.M.)*, law (J.D., L.L.B.)*, clinical psychology (Ph.D*, Psy.D), osteopathic medicine (D.O.), podiatry (D.P.M., D.P., Pod.D.), chiropractic (D.C, D.C.M.), optometry (O.D.), pharmacy (Pharm. D.), and theology (M. Div., M.H.L.).
* Degree program offered by Penn
Borrower advocates warn the shift will raise borrowing costs. “Project Borrowers”, a student loan advocacy group, predicts that replacing Grad PLUS borrowing with private loans would likely add over $10,000 in interest for a student who substitutes fully into private loans.
Others predict the caps will prevent students, especially in lower-paying fields, from taking on unsustainable debt.
A stress test for Penn’s graduate model
Penn enrolled 17,631 graduate and professional students for the 2024-2025 school year. About 3,700 were PhD students whose education expenses are fully guaranteed by the university for at least four years. The pressure lands elsewhere, on the roughly 14,000 non-PhD students for whom federal borrowing has often been part of the pathway.
Penn itself also offers financial aid for graduate students, spending 9% ($99 million) of the endowment’s FY 2025 returns on graduate aid, according to the September Board of Trustees meeting. However, spending at this level is not nearly enough to cover all graduate student costs.
The mismatch is stark. Overall expected costs for Penn’s graduate programs far exceed the new federal limits for both professional ($50,000 annually) and graduate ($20,500 annually) degree loans. Estimated total costs, including tuition, fees, and living expenses for some of Penn’s biggest programs are:
Penn Carey Law J.D.: $121,930 annually (professional degree)
Perelman School of Medicine M.D.: $112,583 annually (professional degree)
Master of Professional Nursing: $101,437 annually (graduate degree)
Wharton Master of Business Administration: $132,404 annually (graduate degree)
Because of Penn’s competitive admissions, these loan limits are unlikely to collapse demand. But the types of students, and how they finance attendance, may change.
Penn faces a few options, each with tradeoffs in revenue, access, and program structure, including:
Lower costs significantly for graduate programs to match federal borrowing limits. This likely isn’t possible for many programs with high costs of education (e.g., nursing, medicine, etc.). As we discussed a few weeks ago, Penn’s long-term sustainability requires financial restraint. Because tuition is a major revenue source, lower prices would require equally real cost reductions or major donor gifts.
Keep tuition steady while significantly expanding financial aid. This would require substantial new fundraising (or budget reallocations) and would force tradeoffs about which programs get subsidized and at what level.
Keep tuition and aid largely unchanged. Students would fill bigger gaps with private and/or state loans, employer sponsorships, or family resources, which may shift the applicant pool and who can afford to enroll in certain programs.
Grad PLUS sunsets on July 1st. For Penn, the next few years will test program solvency. Master’s degrees have long served as areas of revenue generation for American universities, including Penn. This rule change forces a reckoning: programs get cheaper, financial aid increases, or access narrows.
Pressure is rising, testing pricing, aid, enrollment, and Penn’s ability to continue to win over excellent graduate students regardless of their ability to pay. The choices Penn makes now will determine who can afford to attend and how accessible a Penn degree remains in the years ahead.
The Almanac
Curated highlights from this week’s Penn news
Northwestern enters $75M settlement resolution with the federal government
Under the agreement, the university admits to no wrongdoing. Northwestern will pay the federal government $75M over the next three years and take additional compliance steps, including reversing the April 2024 “Deering Meadow Agreement” with protestors to end an “Gaza Solidarity Encampment” on campus, surveying the campus climate for Jewish belonging and antisemitism, and revising materials and policies to align with the federal government’s stance on gender-affirming care for minors.
So what? Penn reached its own federal settlement this summer to restore federal funding and resolve a Title XI investigation, but that was not the only investigation into the university. This week, Penn sought to reassign the EEOC’s lawsuit we discussed a few weeks ago to the judge who dismissed an earlier antisemitism lawsuit for efficiency, then withdrew the motion after learning the judge is expected to retire in September. Northwestern’s agreement shows one path these investigations can take, pairing a financial settlement with specific policy commitments and federal oversight.
University Council renames DEI committee to Committee on Community and Equal Opportunity
The University Council is a governance body, made up of administrative officers and elected representatives from Penn’s staff, students, and faculty, that advises Penn’s leadership and recommends university policies. The former Committee on DEI was a standing committee with the goal of helping Penn “tak[e] full advantage of its diversity.”
So what? Some students and groups opposed removing “diversity” from the title and voted against the resolution. Penn’s administration said the change was required under federal law. The split highlights ongoing tension between compliance with federal policies on DEI at federally funded institutions and campus groups pushing to preserve DEI.
Department of Education updates foreign funding reporting for universities
On Monday, the Trump administration announced a new foreign funding reporting portal launching January 2nd, which was piloted by nine universities and designed to streamline and increase compliance with Section 117 of the Higher Education Act of 1965. Section 117 requires universities to disclose foreign funding totaling $250,000 or more in a year. The press release referenced an ongoing investigation into Penn’s foreign disclosure practices.
Penn, which has the fourth-highest lifetime foreign investment among US universities, has faced recent scrutiny over alleged nondisclosure of some foreign donations, including an ongoing investigation opened in May. In Penn’s rejection of the draft Compact for Academic Excellence in Higher Education, President Jameson said, “Penn is compliant with all federal foreign gift regulations.”
So what? The updated portal signals continued federal focus on foreign influence in higher education. Almost $30 billion flowed from foreign countries into US universities from 2021-2024, with China and Qatar listed as two of the largest contributors. Over that four-year period, Germany was the largest source of foreign funding to US universities, and about ⅔ of that money went to Penn, partially due to COVID-19 vaccine royalties. Penn and its peers can expect heightened scrutiny that may affect which countries give and how much.
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