Jonathan Hughes: [00:00:00] It’s the early ’80s, and college costs are rising. Sure, there’s aid from the government and scholarships from colleges, but even with those elements taken into account, the resulting price of college is becoming too high for too many. So the federal government creates the PLUS program, which allows parents to borrow through the federal government to cover costs.

But even this is capped at $3,000, still not enough to meet costs. So the states stepped up to provide creative financing solutions. The state of Massachusetts creates MEFA. Other states like Missouri, Kentucky, Rhode Island follow suit. PLUS loan caps remain in place until 1992. Parents can now borrow whatever the balance of a college education costs.

Not always at the best interest rate, but these loans are easy to get, [00:01:00] and this allows the dream of a college education to become a reality for many families. Education is an investment, of course, and college degrees yield greater earning power. But just like any investment, there’s an upfront cost. And as more students graduate college, in the face of an ever-competitive job market and the evolving demands of the workplace, advanced degrees become necessary.

And a postgraduate degree, whether a master’s degree, a PhD, or a professional degree, is expensive. But some careers require them. Doctors, lawyers, sure, but also social workers, psychologists, nurses. And as those programs begin to increase in cost throughout the years, once again, the price tag begins to exceed what students can borrow with no credit check through the Federal Student Loan program.

And so once again, a PLUS loan option is created, the Graduate PLUS Loan, a loan that students can apply for to cover the [00:02:00] balance of the entire graduate program. Like the original PLUS loan, this one’s easy to get. It’s supposed to be. No need to demonstrate income, no minimum credit score to be approved, and for twenty years, students relied on Grad PLUS loans to finance their advanced degrees.

Until this year. Starting July 1st, 2026, new graduate students would not be eligible to borrow through the Graduate PLUS program. The program is ending. But we still need doctors, we still need lawyers, we still need engineers, teachers, social workers, and philosophers, right? Of course. So we’ve come full circle, and as the federal government pulls back from graduate lending, it’s the states that once again respond by offering new solutions for graduate students, and these solutions offer competitive financing options that should be carefully considered by prospective students.

Here to talk about this, what all this means, and [00:03:00] what students who are bound for graduate school should know is MEFA’s Shawn Morrissey, not just MEFA’s director of college relations, but for many years a director of financial aid for graduate students, so certainly an expert. Shawn, welcome to the show.

Shawn Morrissey: Thanks, Jonathan. I’m happy to be here.

Jonathan Hughes: So let’s set this up. It was announced that as of July 1st, 2026, new graduate loan students would not be eligible to borrow from the Grad PLUS Program Tell me what is or was Grad PLUS? What is being eliminated?

Shawn Morrissey: So the Grad PLUS Program is a federal loan program that was available to students above and beyond the Federal Direct Loan Program that they were eligible for and still eligible for.

That is the cost of attendance at a school minus what financial aid is. A student could borrow that amount in a Grad PLUS Loan to help with their expenses. It was a credit-based loan, [00:04:00] so the s- student had to show creditworthiness for that, but it wasn’t a certain credit score that they had to have to qualify for this loan.

They just had to show that they did not have any adverse credit, meaning they weren’t seriously delinquent on any type of loan program, or they hadn’t defaulted on a loan program in the past. So they just had to show they didn’t have adverse credit. If a student did have adverse credit, they could have a cosigner to get the Grad PLUS Loan, but it is another type of loan that students had available to them through the federal government that for new students will not be available going forward.

Jonathan Hughes: Okay. Now, it’s not completely gone, right?

Shawn Morrissey: That’s correct. So for students who are continuing at the same school in the same program and had borrowed previously in a Federal Direct Loan Program, so not necessarily the Grad PLUS Program, so they could have borrowed from just the regular Federal Direct Loan Program, [00:05:00] they can remain qualified for Federal PLUS Loans going forward for up to three years or the length of the published length of the program that they’re in, so the shorter of those two.

So if you’re in a two-year program, you’ve already borrowed for one year, you have one year left on that program, you’ll be able to qualify for that Grad PLUS just for that one year that’s left in the program, even though you may have more than that left. So you may have been going half-time, so it’s a two-year program, but it may take you four years to complete that ’cause you’re going half-time.

You only would receive one year left of funding. If that’s a two-year program, you’ve already borrowed for one year.

Jonathan Hughes: Now, there are still some federal loans available to students. You mentioned the Federal Direct Student Loans.

Shawn Morrissey: Yes.

Jonathan Hughes: Has that program changed?

Shawn Morrissey: That program has changed in the loan limits that are available to students, [00:06:00] and there’s a new loan proration that’s called Schedule of Reduction that has to happen on a loan.

For graduate students you can borrow up to $20,500 per year in a program if you’re full-time. There is a new class of students that are called professional students that before this, there was always the definition of professional students, but it didn’t differentiate at all what students could borrow based on that designation.

Now, professional students, which the programs are medicine, dentistry, law, pharmacy, veterinary chiropractic, optometry, osteopathic medicine, podiatry, and theology. So those programs you can borrow up to $50,000 a year, which is an increase from the 20,500 for most of the students. For medical students, they could borrow almost about $48,000 a year, depending on if they’re in a program for 10 months, 12 months.

There’s a little differentiation [00:07:00] there. All of those are getting an increase in what they can borrow, up to that $50,000 a year if they’re full-time students. So I keep saying if you’re full-time students, ’cause that used to not matter. But now there’s something called Schedule of Reduction, which is a proration of the loan.

If you are less than full-time in your program those loans are now prorated based on the amount that you’re attending. So if you’re attending half-time, you’ll receive 50% of those loan limits. So if you’re a graduate student and the loan limit for the year is annually is 20,500 for a full-time student, that’s 10,250 for a part-time student.

In the professional programs, 50,000 if you’re full-time, 25,000 if you’re part-time. And then if you’re, if you’re in a por- a portion that’s different than 50% it’s equivalent to what you- the portion of the program that you’re doing. So you take the number of credits that you are enrolled in, divided by the number of credits it would take to be full-time, and that’s the [00:08:00] percentage that you’re eligible for yearly in that program.

Jonathan Hughes: And how would students know what they’re eligible for? Is that something that they need to figure out on their own, or is somebody gonna tell them?

Shawn Morrissey: So the school will usually tell them. Schools don’t always know what a student’s going to enroll with- … when they’re first giving the students information about what they’re eligible for in loans.

But once that enrollment information comes in when the student enrolls, they will adjust those loans accordingly based on how much they are enrolled in. So a student doesn’t really need to know the exact amount that they’re eligible to borrow other than for planning purposes. You need to know that, “Oh, I thought I was gonna be able to borrow $20,500, but I’m a half-time student, so I can only borrow $10,250.”

That’s a big difference- … for a student when you’re planning what you might be able to borrow.

Jonathan Hughes: I want to take a quick break from my conversation with Shawn to tell you that if you think what we’re talking about here will mean something to someone in your life, a family member or a friend, then go ahead and send them this episode.

And if it means something to you [00:09:00] and you wanna check out more guidance or financing options from MEFA, then visit mefa.org. Okay, back to the show. Now, everything that we’ve been talking about so far has been federal government loans. Everything that we’ve been talking about has been something that MEFA doesn’t lend out.

We always counseled undergraduate students that they should first exhaust all of their Federal Direct Student Loans before moving on to other types of loans, private loans, state-based loans, et cetera. Does that same guidance still apply to exhaust your Federal Direct Student Loans first before moving on to other types?

Does that still apply to graduate students?

Shawn Morrissey: So it’s a little more complicated of a conversation when you’re going into graduate school- because there are different types of students. You have students that are coming into graduate school right out of undergrad. They don’t have an income. They don’t have any kind of credit built [00:10:00] up.

So they may not qualify on their own for alternative loans, state-based loans, private loans. And So they may want to take advantage of any federal loans that are available to them without having to show credit worthiness. Sure. Other students may be coming in getting their graduate degree later on in their career.

They already have established credit, they already have an established income, and they may wanna just have the lowest interest rate on their loan. They may not need to take advantage of income-based repayment programs or, any type of forgiveness programs that are available through federal loans, and just may wanna pay the least avail- least amount over the life of the loan and get a lowest interest rate.

Sometimes you may be able to get a lower interest rate through an alternative loan program in that case, if you don’t need to take advantage of those benefits that are there to the federal programs. Also, I was talking about the loan proration, and there are also [00:11:00] caps on the amount that students can borrow.

So they have those annual caps, plus they have lifetime caps on those loans. So if students have already borrowed a lot through their undergraduate programs and they’re bumping up against those caps, they may not have the eligibility left for those federal loans, or they may wanna just borrow at that lower interest rate they may get from an alternative loan program from one lender, rather than borrowing some from a federal lender, some from an alternative loan to make up the amount that they can borrow to pay for school, and only have one payment once they get out of school for those loans, rather than having some going to the federal loans, some going to an alternative loan, and sometimes that complicates things.

So there are more things to consider when you’re trying to decide to borrow for graduate school.

Jonathan Hughes: So speaking of that, I’m a graduate student, I’m going back to school. The Grad PLUS Loan is not an option anymore. How does that change financing for me?

Shawn Morrissey: So you want to see what is out [00:12:00] there and available for you.

You want to see w- what programs might be attractive to you, what you need in a loan. Do you need a longer deferment period because you’re in a medical program that you’re going to need to delay the payments while you’re in something like residency where your income is lower for a period of time before you get to the point in your career where your income’s at its highest, and then you can make higher payments at that time?

Or do you want the lowest interest rate? Do you have creditworthiness on your own, or are you going to need a co-borrower or co-applicant on that loan? So to qualify for credit-based loans, if your credit on your own are, is not the best or you haven’t established credit yet, you can always get a co-applicant on that loan to help you either get a lower rate or to qualify for the loan at all for different alternative loan programs.

Jonathan Hughes: And when we’re talking about these options, we’re talking about options from state-based lenders or private for-profit lenders, right? And [00:13:00] so thinking about that, as someone who works with colleges, We’re talking about the various options that specifically state-based lenders have started to initiate since the Grad PLUS Loan has been eliminated.

Can you tell me what that process was like of developing those programs? What went into that?

Shawn Morrissey: Sure. So there were a lot of conversations that were happening in the last year since the announcement was made that Grad PLUS was going away into what programs are needed by students. So we talked to financial aid offices, we talked to students to see what their needs were in programs.

So was it just a low interest rate, or were there other things that were involved in that? And through that MEFA and a lot of state lenders private lenders as well, for-profit lenders, developed programs to help with specific needs. For example, we have at MEFA now a medical school loan that offers a longer deferment period, so students can defer [00:14:00] or ha- make interest-only payments for four years while they’re in school, and then that can continue while they’re in residency so that they can defer those payments or make interest-only payments throughout their residency until they complete that residency.

And then once they’re finished with that and start with their higher income, then they can make their, the higher payments. For law students, there’s a one-year deferment after leaving school to help with clerkship. For veterinary, it’s similar to our medical school loan. So we have options for that, and we have a health professions loan now.

And for our regular grad loan, we increased the in-school deferment options from three years to four years, so students have a longer time that they can spend in school. ‘Cause there are times when even for a two-year program, if a student’s going half-time, it may take four years to complete that degree.

So being able to have that loan deferred or interest-only payments while you’re in school really helps with [00:15:00] being able to afford those payments, ’cause sometimes while you’re in school you’re not able to work. Some of these programs, the students are in school in such an intense way that they can’t be working while they’re in school.

Other programs allow the students to be in school, so there’s flexibilities to these programs. And we really look closely at what the differences between these programs are when developing them by talking to schools and talking to students about their needs.

Jonathan Hughes: So we’ve been talking about state-based lenders and for-profit lenders. How should people understand the difference between those two things?

Shawn Morrissey: So state-based lenders the way they get their funding is different, so oftentimes there can be lower interest rates that are passed on to the borrower through that. There’s also a lot of mission-based activity that are done by state-based lenders, and what I mean by that is we work really closely with families from very early in the program, so starting with them before they’re even looking at undergraduate schools talking about wise borrowing, talking [00:16:00] about ways to pay for school, savings programs, all those kinds of things that we do programs with students so that they can limit the amount that they borrow.

So we’re trying to work with families through even doing FAFSA days and doing a lot of education, webinars, one-on-one calls. We have an 800 number with advice for families students, any type of borrower that has a question can give us a call, and we’re gonna try to advise them as what’s best for them. And a lot of times that includes limiting the amount that they’re borrowing.

Jonathan Hughes: And whether it’s state-based lender or a for-profit lender, how should students compare their loan options? What are some of the things that they should be thinking about when they’re looking at their options?

Shawn Morrissey: Yes, you should look at the information that’s out there for all the different lenders that are out there.

So a good place to start would be with the college that you’re attending. They may have what’s called a preferred lender list on their website, which is sometimes a historical list of lenders that students [00:17:00] that went to that school have used in the past. Sometimes they’ve gone through a process that they vet the different lenders to see what the different rates are for the lenders, what different benefits they may have on their loans.

They look at the lenders and make a decision as to which lenders they may list on their website. You don’t have to use only the lenders that are on that college’s website. You can use any lender that’s out there and available, but that’s a good place to get a start as to what some of the options would be.

I’d always, recommend that a student looks at the state-based lender in their state to see what offerings they have. Then the student can go to the website, and there are disclosures there that show what the interest rate is on the loan. So usually there’s a range of interest rates. Yeah. You wanna look at that range.

Some of them can be very wide, so some of them can go from 3% up to 18% so they can be quite large. State-based lenders tend to have a more narrow range. But most students fall somewhere in the middle. So the average student [00:18:00] falls somewhere in the middle of that. But you can also check what your actual interest rate is with each lender.

So some lenders are going to offer a five-year rate through a soft credit pull process, which what that means is when you go through that application process to see what your rate is they’ll tell you up front, “This is going to be a soft credit pull.” It won’t ding against your credit and change your credit rating based on you doing this application.

However, some s- lenders don’t have that option, but you can still go through the application process, find out what your actual interest rate is by applying for the loan. You don’t have to accept the loan at that point. Shop around to other lenders, as long as you do that within a certain timeframe. It’s usually 14 to 30 days, depending on the credit agency that you’re being reported to.

And if you do that, it’s only going to count as one hit on your credit. So it’s as if you’ve applied for one student loan, as long as you’re doing that within a certain time period, and you can then find out what the [00:19:00] best rate is for you personally.

Jonathan Hughes: So that’s rate. What else should people consider other than rate?

Shawn Morrissey: So there are a lot of other things to consider. You want to look at fees on the loan so you want to check again when you’re looking at that disclosure, they have to disclose on there if there are any fees associated with the loan. You also want to look at the different repayment options that are out there.

Some lenders can offer repayment options as low as six years. You have to repay that loan within six years. Others can go up to 20 years or more. So the longer you extend that repayment period, usually the more you’re paying in interest, of course, over the course of the year, but the lower your payment is.

So for some students, having a longer repayment period may be advantageous to them because they want to have their payments as low as possible. For other students, they’ll want to pay the least over the life of the loan, so they want a shorter repayment program. So you want to look at what those options are.

You also want to see what those deferment options are if you’re in a program that has something like a residency or clerkship [00:20:00] after you graduate to make sure that you’re not going to have to make full payments while you’re in that program and something you may not be able to afford based on your income at that point.

Jonathan Hughes: Okay, so I’m going to finish with some practical advice here. Let’s say I’m a, a- graduate student or I’m going to be starting graduate school soon and I’m looking to borrow, what are three things that I should consider that sometimes people don’t?

Shawn Morrissey: The first thing that I think is really important is there are expenses in the cost of attendance that you have control over.

So a lot of times, I was talking about how the amount that you can borrow is cost of attendance less your financial aid. So you have control over some of those costs of attendance features. So you can’t control what tuition and fees are, but y- for most cases for graduate school, you’re not living on campus, you’re living on your own.

You can make decisions about where you’re living what those costs are. Can you have a [00:21:00] roommate that you can split those costs with? Because then it’s not just the cost of rent that you’re splitting, but, electricity, water bills, things like that you can split as well if you have roommates try to keep those costs down.

I know coming out of undergraduate going right into graduate, you might be sick of living with roommates, but can you do that for a couple more years? Your future self may really thank you when you’re not having to make those large payments. Because think about if you have $1,000 rent, you’re paying interest on that, you’re paying that over 20 years, that may be $2,000, $3,000 by the time you pay that interest for each $1,000 a month amount you’re paying for that monthly rent.

So you could really want to try to keep those expenses as low as possible while you’re in graduate school. Also food costs, that’s another part that’s in the cost of attendance. You can keep those things down. Transportation costs those are things that you can look at, and try to keep those expenses down so you’re borrowing as little as possible when you’re going into [00:22:00] graduate school.

Jonathan Hughes: All right, number two.

Shawn Morrissey: Number two. So you want to see what options there are to help those tuition and fee costs come down. So check with your employer. Do they do any type of tuition remission programs? Those are great to take advantage of. They may pay for half of the tuition each semester. They may give you $200 to tuition.

Make sure you take advantage of those programs if you have those. Check with the school themselves to see if they have opportunities that you can work on campus. They have assistantships that are available where you can work on campus in different offices on the college campus, and sometimes they can re- give you reductions in tuition or give you some money towards your tuition to do that.

If you are willing to live on campus and you want to get some free housing, sometimes there are resident director jobs where you’re supervising the undergraduate staff with undergraduate housing, and you can have free living [00:23:00] costs, and sometimes they might give you a stipend or amounts off on your tuition as well.

So check with the schools to see what opportunities are there for you.

Jonathan Hughes: And number three.

Shawn Morrissey: Number three is to know- What your credit worthiness is already. Try to figure out what your credit score is. Go to freecreditreport.com, pull your credit score take a look at that, and be prepared. So if you don’t already have established credit, if you’re just coming out of undergrad, haven’t been able to establish a credit yet, then if you need to have a co-borrower see who is willing to be a co-borrower for you.

Sometimes even if you have credit worthiness, you may be able to have a co-borrower that can lower the amount that you’re paying in interest, because usually the highest your- higher the credit score, the lower you’re paying in interest. So find out who might be willing, like a relative, a friend of the family who might be willing to co-sign those loans for you so that you can get the best rate.

Jonathan Hughes: Other than that, is there anything else that we haven’t talked about that you think it’s important for people to know [00:24:00] about this process?

Shawn Morrissey: The only thing I think is important to know is to reach out to the financial aid office if you have questions. There may be opportunities that they have available for you to help pay for college.

They may have advice for you on best ways to pay for college. They’re really a resource for you, so don’t be afraid to reach out to them if you have questions or comments. Also, you can call your state-based lender. For example, MEFA has a 1-800 number we can advise students on if you have questions about borrowing.

We take those all day long and happy to help.

Jonathan Hughes: Thanks so much for being here, Shawn, and we’re going to be posting some links in the show notes to some of our guidance and options on mefa.org, and we hope you check them out. Until next time, my name is Jonathan Hughes, and this has been the MEFA [00:25:00] Podcast.