Greetings, On The Money readers!
I am on vacation at the beach with my family, so I'll keep this edition short and sweet.
I also celebrated a birthday (!) this week. As I take another turn around the sun, I'm especially grateful for your loyal readership.
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Our youngest son is heading to graduate school for an engineering degree, so I am especially interested in U.S. President Donald Trump's new tax and spending bill, which was signed into law on Friday.
The law will affect the amount students and their families can borrow for federal financial aid, as well as eligibility for Pell Grants, designed to help low-income undergraduate students. It also impacts graduate school funding – Grad PLUS loans will be eliminated.
Grad PLUS loans were created in 2006 to help graduate students cover the cost of attendance that exceeded the maximum $20,500 a year graduate students could receive through unsubsidized Stafford loans. (The tuition for my son's graduate program is about $37,000 a year – that's not including living expenses or other incidentals.)
As of this year's second quarter, there were 1.8 million Grad PLUS borrowers and they borrowed a total of $117.2 billion to pay for graduate school attendance, according to Federal Student Loan Portfolio data.
Under the new legislation, unsubsidized graduate borrowing for master's programs will be capped at $20,500 per year ($100,000 lifetime) and $50,000/year for professional programs such as law and medicine ($200,000 lifetime). Right now, borrowers can apply for a Grad PLUS loan up to the cost of program attendance if they need more to cover tuition or living expenses.
That will leave families scrambling to fill the gap. And private loans often have higher interest rates, which may deter some from attending graduate school in the first place.
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