The One Big Beautiful Act: Impacts for Graduate Loan Funding

The One Big Beautiful Act: Impacts for Graduate Loan Funding
April 23, 2026 12 mins

The One Big Beautiful Act: Impacts for Graduate Loan Funding

Graduate PLUS Changes and the Future of Funding

Recent legislation, in particular HR1: The One Big Beautiful Bill Act (OBBBA),1 impacts higher education in various ways including eliminating the Graduate PLUS program. Educational institutions will feel the impact of this loss and should consider risks and options.

Key Takeaways
  1. The loss of the Graduate PLUS Program introduces new challenges for most universities including financial, competitive and enrollment risks.
  2. Universities should take the time to evaluate the potential impact to the student population currently accessing Grad PLUS loans, which could include reductions in program enrollment, the shuttering of specific university programs, and the future impact on the institution’s financial stability.
  3. Emerging options include tuition discounts and scholarships, private market lending, and university‑led loan programs. Institutions should evaluate near‑term fixes for 2026–27 while building sustainable, long‑term alternatives.

The opinions referenced are as of the date of publication and are subject to change due to changes in the market or economic conditions and may not necessarily come to pass. Information contained herein is for informational purposes only and should not be considered investment advice. Investment advice and consulting services provided by Aon Investments USA Inc. (Aon Investments).

How does HR1: The One Big Beautiful Bill Act, impact Graduate PLUS Programs?

The OBBBA was signed into law July 2025 with the expectation that its guidance will be enacted over the coming years. One aspect of the OBBBA is the elimination of new loans from the Grad PLUS Program after July 1, 2026, thus beginning in the 2026-2027 academic year. Grad PLUS program loans have been issued by the U.S. Department of Education since 2006.

The 2005 Higher Education Reconciliation Act authorized the initial loan program, and implementation began in the 2006–2007 academic year. While existing students will continue to have access to federal loans under a “legacy” provision, the Grad PLUS loan program is eliminated for new borrowers starting with the 2026–2027 academic year. It is challenging to get exact figures on the total amount of student loans and the number of students impacted, but the following key statistics provide useful context:

  • Based on a Brookings Institute report,2 in 2025, about 43 million Americans owned more than $1.6 trillion in federal student debt, with Grad Plus representing about $15 billion in loan origination. (NB. student debt and loan origination are not the same figures).
  • According to the Education Department Federal Student Aid office, 1.8 million borrowers hold $1.2 billion in debt; furthermore, 16% of graduate students rely on Grad PLUS representing 32% of all graduate loan disbursements.3

The loans have been used not just for tuition but for reimbursement of living expenses such as housing, transportation, books, supplies and food.

Not only does the OBBBA eliminate the Grad PLUS program, it also institutes annual borrowing limits for unsubsidized loans of $20,500 for most graduate students (with an aggregate limit of $100,000) and $50,000 for “professional” students (with an aggregate limit of $200,000). The term “professional” is defined in the OBBBA and includes pharmacy, dentistry, law, medicine, and other professional degree programs. In addition, the OBBBA tightens other federal aid programs: Pell Grants and Parent PLUS loans for undergraduate students are not eliminated, but they are subject to stricter eligibility guidelines and/or tighter borrowing caps.

16%

of graduate students rely on Grad PLUS loans, representing 32% of all graduate loan disbursements.3

How will the removal of federal funds impact universities?

The elimination of the Grad PLUS loan program will impact hundreds of universities in the United States, and thousands of their students. It is expected that the program loss will lead to operational and financial risks for universities. Many universities are already facing diminished student enrollment due to rising costs and other issues. Enrollment projections are further pressured by an impending “enrollment cliff,” an unfavorable demographic shift resulting from declining birth rates and population shifts.4 Many students, already struggling to afford graduate school, may be unable to attend going forward. It is expected that this will drive the closure of some graduate programs with students’ inability to pay. The estimated financial and programmatic impact varies by institution depending on its student composition. This is a long-term risk for educational institutions.

Universities should be spending time understanding the impact. Questions to ask and data to gather include:

  • What is the average number of graduate students at the university accessing the Grad PLUS program?
  • What is the revenue generated from those students?
  • How many of those students may have access to other private loan sources (for instance, if their credit scores are high, can they receive a loan from a bank)?
  • What is the average debt of the university’s graduate students?
  • Will programs need to be shuttered if graduate students aren’t able to access loans?
  • What may be the long-term impact with the loss of future alumni?

What are the potential options and what are the risks for universities and students?

With the federal government pulling back on funding, many students are left with the following choices: choose not to attend graduate school, seek a less expensive graduate program, or seek alternative funding.

Universities will be impacted no matter which of these paths the prospective students select. It is relatively easy for a university to quantify impact from the loss of students; student decline leads to lost revenue not only in tuition, but also in room and board and other activities a student may engage in on campus. Furthermore, the student, upon graduation, can be an important source of potential donations as an alum as well as serving as an ambassador for the future student body. Less easy to quantify is the impact on the school’s reputation.

Thus, it is vital to help students identify other sources of funding. We are beginning to see alternative student financing programs emerge, both initiated by some elite universities as well as financial institutions. For instance, Sallie Mae and KKR have launched a strategic partnership whereby Sallie Mae is servicing loans KKR is purchasing.5,6 Santa Clara Law launched “PLEDGE Scholarship” for Fall 2026 incoming students. The scholarship program is the university’s response to the new federal loan limits as it states, “guaranteed $16,000 scholarship for every full-time student in next year’s incoming class…to ensure access to funds they need to cover cost.”7

The following are a few considerations for providing a funding alternative for students: University provides a source of funding in the form of a loan, perhaps leveraging the endowment if it is sufficiently large. Students seek funding from private sector Universities make structural changes to their graduate programs which might include lowering costs, changing admittance qualifications/student make-up, eliminating programs.

The following are a few considerations for providing a funding alternative for students:

  • University provides a source of funding in the form of a loan, perhaps leveraging the endowment if it is sufficiently large
  • Students seek funding from private sector
  • Universities make structural changes to their graduate programs which might include lowering costs, changing admittance qualifications/student make-up, eliminating programs

The following table provides the pros and cons to each of these options.

Options Pros for University Cons for University
University provides loans
(see below for further considerations for this option) 		• Increases chance of growing the student population by providing a solution unique to the university
• Protects the university from the downsides of changing funding legislation
• Capitalizes on university’s unique positioning to originate loans for their student population 		• Managing a loan program may be challenging
• Increasing chance of potential financial losses if students default
• Quality of collateral for loan may be lower than desirable
• Requires developing infrastructure and framework for offering a loan program
• Enhances risk perception of “school as a lender”
Student sources loans from private sector • Eliminates need for university to build an additional loan program • Students may not qualify for private sector loans because of credit rating
• Students may not know how to identify other funding opportunities
• High rates and higher penalties may lead to a more costly solution for borrowers (students)

Let’s delve further into the first option of a university providing loans in response to the loss of the Grad PLUS Program. Developing one’s own loan program is not an easy task. In our view, it would be important for a university to seek the guidance of external advisors in several areas in order to structure a program most aligned with the needs of the institution.

Activity for Developing Loan Program Initial step(s)
Credit underwriting Identify third-party experienced student loan underwriting firms
Loan Servicing Assess student loan servicers
Loan Structuring Select an investment bank (typical entity for structuring loans for institutions)
Insurance wrap structuring Create an insurance wrap on a portion of the pooled loans to reduce borrowing costs8.
Collateral and/or funding sourcing Evaluate endowment as possible source of funding and/or collateral
Loan investors Identify potential investors which may include university’s endowment or other institutional investors including asset managers

In summary, the loss of the Grad PLUS program poses a number of key risks for many universities including:

  • Revenue and enrollment risks – lower graduate/professional enrollment and net tuition revenue.
  • Competitive risk – may fall behind other institutions that can subsidize programs or replace federal loan programs.
  • Demographic risk – unintended shifts in student composition driven by ability to pay.
  • Operational and compliance risk – Need to redesign aid, partner with private lenders, or create school-based financing, with the accompanying regulatory and credit risks
  • Financial risk – if a school-based financing program is created, then potential defaults or use of endowment assets could be material.
  • Program risks – potential closure or contraction of vulnerable programs.
  • Ranking and Accreditation risks – The loss of students could impact future assessment of the university as fewer students graduating and going on to successful careers is a component of ranking and accreditation.

We encourage universities with graduate programs to assess the impact of the OBBBA and be proactive in developing solutions.9 Aon has recently met with a number of universities to explore these issues.

With our higher education team, we are able to provide guidance on these topics in several ways, including loan replacement modeling, assessment of collateral and funding sources such as engagement of endowment and advising on credit risk insurance on loan pools.

Aon’s Thought Leaders
  • Heather Myers
    Solutions Leader for Non-Profit Organizations, Aon Investments USA Inc.
  • Aaron Olson
    EVP, Enterprise Client Group, Exec Sponsor, University Partnerships
  • Emily Stella
    Solutions for Non-Profit Organizations, Aon Investments USA Inc.

1 H.R. 1 – 119th Congress (2025–2026): An act to provide for reconciliation pursuant to title II of H. Con. Res. 14 | Congress.gov | Library of Congress
The third-party websites referenced in this document contain information that has been created, published, maintained, or otherwise posted by institutions or organizations independent of AIUSA. AIUSA does not endorse, approve, certify, or control these websites and does not assume responsibility for the accuracy, completeness, or timeliness of the information located there.
2 Looney, Adam, Jordan Matsudaira, and Clare McCann. “How OBBBA Reshapes Student Lending.” Brookings Institute. January 28, 2026.
3 “What’s the impact of ending Grad PLUS loans?” The Feed. October 17, 2025. https://feed.georgetown.edu/access-affordability/whats-the-impact-of-ending-grad-plus-loans/
4 Marcus, Jon. “A looming ‘demographic cliff’: Fewer college students and ultimately fewer graduates.” NPR. January 8, 2025. https://www.npr.org/2025/01/08/nx-s1-5246200/demographic-cliff-fewer-college-students-mean-fewer-graduates
5 “Sallie Mae Launches Private Credit Strategic Partnership with KKR.” Sallie Mae. November 12, 2025. https://news.salliemae.com/news-releases/news-releases-details/2025/Sallie-Mae-Launches-Private-Credit-Strategic-Partnership-with-KKR/default.aspx
6 “SLM Eyes Next Growth Phase as Grad PLUS Reforms Fuel 12%–14% Origination Outlook.” MarketBeat. February 11, 2026. https://finance.yahoo.com/news/slm-eyes-next-growth-phase-123542107.html
7 “Santa Clara Law Launches Groundbreaking ‘PLEDGE Scholarship’ for Fall 2026 Incoming Students.” Santa Clara University School of Law. September 17, 2025. https://law.scu.edu/news-events/news/2025/santa-clara-law-launches-groundbreaking-pledge-scholarship-for-fall-2026-incoming-students.htm
8 Insurance premiums effectively derisk the portion of pooled loans they are applied against, and a less risky pool of loans attracts more investors at a more favorable rate.
9 Some educational institutions have posted updates on their website saying they are seeking a solution, though haven’t yet provided details on what that solution might be (as of the publication of this article, April 2026). NYU posted the following: “Revisions to Federal Student Loans in the One Big Beautiful Bill Act”

General Disclaimer

The opinions referenced are as of the date of publication and are subject to change due to changes in the market or economic conditions and may not necessarily come to pass. Information contained herein is for informational purposes only and should not be considered investment advice. Investment advice and consulting services provided by Aon Investments USA Inc. (Aon Investments). The information contained herein is given as of the date hereof and does not purport to give information as of any other date. The delivery at any time shall not, under any circumstances, create any implication that there has been a change in the information set forth herein since the date hereof or any obligation to update or provide amendments hereto. This document is not intended to provide, and shall not be relied upon for, accounting, legal or tax advice or investment recommendations. Any accounting, legal, or taxation position described in this presentation is a general statement and shall only be used as a guide. It does not constitute accounting, legal, and tax advice and is based on Aon Investments’ understanding of current laws and interpretation. The third-party websites referenced in this document contain information that has been created, published, maintained, or otherwise posted by institutions or organizations independent of AIUSA. AIUSA does not endorse, approve, certify, or control these websites and does not assume responsibility for the accuracy, completeness, or timeliness of the information located there. This document is intended for general information purposes only and should not be construed as advice or opinions on any specific facts or circumstances. The comments in this summary are based upon Aon Investments’ preliminary analysis of publicly available information. The content of this document is made available on an “as is” basis, without warranty of any kind. Aon Investments disclaims any legal liability to any person or organization for loss or damage caused by or resulting from any reliance placed on that content. Aon Investments reserves all rights to the content of this document. No part of this document may be reproduced, stored, or transmitted by any means without the express written consent of Aon Investments. Aon Investments USA Inc. is a federally registered investment advisor with the U.S. Securities and Exchange Commission. Aon Investments is also registered with the Commodity Futures Trading Commission as a commodity pool operator and a commodity trading advisor, and is a member of the National Futures Association. The Aon Investments ADV Form Part 2A disclosure statement is available upon written request to the contact information provided below. In Canada, Aon Solutions Canada Inc. and Aon Investments Canada Inc. (“AICAN”) are indirect subsidiaries of Aon plc, a public company trading on the NYSE. Investment advice to Canadian investors is provided through AICAN, a portfolio manager, investment fund manager, and exempt market dealer registered under applicable Canadian securities laws. Regional distribution and contact information is provided below. Aon Investments USA Inc. 200 E. Randolph Street Suite 600 Chicago, IL 60601 ATTN: Aon Investments Compliance

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