The President’s assaults on federal research funding, Grad Plus loans and foreign students have halted a decade of graduate program growth. A shakeout is coming.
For more than a decade, graduate programs have been a growth engine for the nation’s universities, fueled by uncapped federal Grad Plus loans for U.S. citizens and permanent residents, a flood of tuition-paying international students, and tens of billions in federal research grants. Now, President Donald Trump, with an assist from the Republican-controlled Congress, has abruptly cut off the fuel supply and thrown that engine into reverse. A painful adjustment is just beginning.
In addition to freezing research grants to specific elite institutions as a cudgel against those Trump considers too “woke” (e.g. Harvard, Columbia, Cornell, Northwestern and UCLA), his administration has canceled an estimated $7 billion in science grants at more than 600 schools in all 50 states, sharply limited overhead payments to universities for continuing grants and proposed even deeper funding cuts for fiscal 2026 beginning on October 1. Compounding the uncertainty, a Trump executive order issued just last week requires political appointees to approve all new grants, and demands that existing awards be revised to allow an agency to terminate them at any time if priorities change.
Meanwhile, the One Big Beautiful Bill Act (OBBBA) Trump signed in July cut $307 billion from the cost of federal student loans over the next decade, in part by making paying back loans more onerous. Crucially, it also shut off the Grad Plus loan spigot for those starting their studies after July 1, 2026. Whereas current grad students can borrow their full cost of attendance, including tuition, fees, books, housing and food, most new graduate students will be able to borrow a maximum of $20,500 a year directly from the government, with a lifetime limit of $100,000. Those enrolling in medical, dental, law and other professional schools will be able to borrow $50,000 a year, with a $200,000 lifetime limit. A good chunk of grad student borrowers currently exceed those new annual limits–at the extreme, 73% of dental students who took loans in 2019-2020 borrowed more than $50,000.
The Grad Plus pain is still a year away. But schools are already feeling the effects of Trump’s harsh and ever evolving approach to international students. New foreign enrollments could decline by 30% to 40% this coming school year, leading to an overall 15% decline in their number on U.S. campuses, estimates NAFSA: Association of International Educators. The administration temporarily paused issuing student visas while it added a screen of applicants’ social media to the process; has restricted or barred new visas for residents of 19 countries; and has attempted to expel foreign students who participated in (or voiced support for) pro-Palestinian protests. The Trump Administration even tried to revoke Harvard’s ability to enroll any foreign students, though a court blocked that extraordinary punishment.
The table below shows 25 vulnerable large and mid-sized private schools on Forbes’ list of America’s Top Colleges. Each had at least 2,000 graduate students in 2022-2023, making up 35% or more of the school’s enrollment, with a quarter or more of those grad students here on foreign student visas.
Back in June, Forbes highlighted 16 already financially struggling (and mostly small and little known schools) that were put at risk by Trump’s overall foreign student crackdown.
What’s striking about this new list of 25 with graduate student vulnerability is it includes many of the nation’s most prestigious institutions, including six of the eight members of the Ivy League. Moreover, 20 of the 25 earned at least an A- (and 14 an A+) on Forbes College Financial Grades 2025, based on financial metrics before Trump reoccupied the White House. These universities will survive, but face a painful adjustment, particularly since most of them have also been big recipients of federal research dollars.
At the top of the list is New York City’s Columbia University, whose student body in 2022-2023 was composed of 72% graduate students, with 49% of those coming from abroad. In late July, Columbia inked a deal with the Trump Administration which requires it to pay $221 million to the government and, among many other things, fork over to the feds more information on its foreign students and try (in unspecified ways) to reduce its “financial dependence on overwhelming international student enrollment.” In return, the school says, the $1.3 billion in federal grants and other funding it relies on a year should start flowing again. A Hobson’s choice.
In addition to killing Grad Plus loans, OBBBA took another swipe at some of the wealthiest private universities on our list: MIT, Harvard, Princeton, Yale and Washington University in St. Louis, among others, now face sharply higher taxes on the earnings of their endowments.
While most universities have yet to lay out long term restructuring plans, programs around the country are taking some immediate actions— freezing hiring, laying off workers and cutting (or suspending) new enrollment in some PhD programs that depend on grants. John Hopkins, the top university recipient of federal grants and contracts—it got $4 billion of federal funds making up 41% of its budget in 2022-2023—lost $800 million in contracts when Elon Musk and DOGE dismembered the U.S. Agency for International Development. In March, it cut 2,200 jobs, most of them abroad. In June, citing a continuing stream of additional cancelled grants, a two thirds drop since January in the award of new grants, and actions affecting foreign students and graduate student loans, it instituted a university-wide hiring freeze and halted pay raises for anyone earning more than $80,000. Northwestern, which has had $790 million in grants frozen, is eliminating 425 positions, about half of them already vacant. At Duke, another graduate education and research powerhouse, nearly 600 staff and 40 faculty have accepted voluntary separation and involuntary layoffs are now underway.
“The status quo is not an option,’’ the dean of the Division of Arts & Humanities at the University of Chicago bluntly declared in an email she sent to the faculty of the 15 departments she oversees, which the school is considering consolidating into eight. According to the student newspaper, which viewed the email, she ticked off a list of reasons structural change is needed, including a higher endowment tax, changes in graduate student loans and developments affecting international students. She also cited a possibly souring economy which could lead to lower donations as a worry.
Between the 2011-2012 and 2021-2022 school years, the number of doctorates (including PhDs and law, medical and dental degrees) awarded annually grew by 20% to 203,900, while master’s degrees climbed 16% to 880,200. Meanwhile, bachelor’s degrees increased just 12% to 2,015,035, according to the National Center for Education Statistics.
It’s hard to overstate how important foreign students and unlimited Grad Plus loans have been to the graduate school boom. (While federal grants are still by far the biggest source of university research money and support many Ph.D. candidates, they actually declined as a share of universities’ total research funding during that growth decade.)
Congress launched the Grad Plus program in 2006, so it was in place when the Great Recession hit and the unemployment rate for young college graduates (ages 22 to 27) surged from 3.4% in December 2007 to 7.9% in December 2010. Truth is, the rate would have gone way higher if a lot of young grads hadn’t decided to either hide out in graduate school, living on government loans, or to settle for non-college jobs (e.g. as baristas).
“When the economy is softer, students go back and get another degree to really separate themselves in the labor market,” observes Robert Kelchen, head of the Department of Educational Leadership and Policy Studies at the University of Tennessee, Knoxville. The weak economy and unlimited loans set off a graduate degree arms race, of sorts. With so many folks having earned advanced degrees (and particularly a master’s) the bar was raised, with both employers and job hunters thinking that extra sheepskin mattered. “In the last few years, when the economy has been fairly strong, people see graduate school as a way to really separate themselves in the labor market,’’ says Kelchen.
Seeing the demand and the unlimited pot of money, revenue-hungry schools rushed to launch new master’s programs–some, in retrospect, of dubious value. Between the 2004-2005 school year and 2021-2022, the number of master’s programs offered by private nonprofit universities nearly doubled, according to a study Kelchen coauthored.
Growth wasn’t even across subject areas. Master’s degrees in computer, information sciences and support services; health professions; and public administration and social services climbed the most between 2011 and 2022, growing 145%, 75% and 20%, respectively. But master’s of business administration, an already well established way to get ahead, rose just 7%.
Not surprisingly, with no limits on graduate student borrowing, the average net cost of tuition and fees in a master’s degree program (that is, the cost minus grant aid from the school), started rising faster than the net cost of undergraduate study. (The amount undergraduates can borrow from Uncle Sam has remained capped at anywhere from $5,500 to $12,500 a year, depending on undergraduate year and if the student is independent.)
“A lot of colleges have gotten themselves into a financial position where they are reliant on graduate tuition revenue as a major source of funding for them, and so that is a change in how they will need to operate and think about how they structure themselves,” says Michelle Dimino, the director of think tank Third Way’s education program.
Meanwhile, U.S. graduate programs, and particularly those in technology, engineering and math (STEM), came to increasingly rely on foreign students. In 2021-2022, just 16% of all U.S. master’s degrees and PhDs awarded were in STEM. But international students earned 44% of their master’s and 58% of their PhDs in STEM.
After dipping during the pandemic, international school enrollment in U.S. graduate programs set a new all-time record in 2023-2024, when there were 502,291 foreign grad students studying in the U.S., an 8% increase from the year prior, according to data from Open Doors. By contrast, the number of foreign undergrads that year was down 1% to 342,875.
One of the draws of studying here is that international graduates of U.S. universities, particularly in STEM subjects, have had an advantage when it comes to staying in the U.S. to work. In 2023-2024, a record 242,782 international students were enrolled in Optional Practical Training (OPT), a program which lets students stay to get practical work experience for a year after graduation, or for three years if they majored in STEM. But the Trump Administration seems likely to revamp immigration policies in a way that could end or limit OPT–yet another hit to the international appeal of a U.S. degree.
What comes next? Federal research funding cuts and uncertainty are already leading schools to apply the brakes to some PhD programs, limiting or even pausing admissions of students who have traditionally been supported by grants. Duke’s medical school is even hashing out a controversial plan that would cut the salaries of tenured basic science professors who had relied on lost research dollars from the National Institutes of Health.
The coming end of Grad Plus is likely to affect different graduate programs very differently, but education experts expect more termination of programs than chopping of tuition. The high cost of lab equipment and faculty makes it impossible to drop prices “overnight,” says Third Way’s Dimino. “We might see some schools who decide that the cost of a given master’s degree program or graduate degree program compared to what they can bring in in revenue from it now, with these different caps, isn’t worth it for them,” she adds.
If prices don’t come down, can students pay their bills without Grad Plus? A new analysis by Jason Cohn at the Urban Institute shows that in the 2019-2020 school year, 56% of all dental students, 41% of all medical and osteopathic students, and 20% of all law students borrowed more than the new annual limit that kicks in on July 1, 2026. That includes those students with rich parents who didn’t borrow at all; of those who did borrow, 73% of dental students, 57% of medical and osteopathic students and 30% of law students borrowed more than the new $50,000 a year limit.
Private lenders are likely to fill in the gap for many of those professional school students, given their high earnings prospects. Kelchen expects to see less interest in lower paying fields, like public interest law, because future students will have to focus on repaying private loans which don’t–unlike the federal ones– have provisions for income based repayment and (if they’re working for government or not-for-profits) possible loan forgiveness after 10 years of repayments. Similarly, in medicine, the switch to private loans could mean fewer low income students in medical school, and fewer MDs ready to go into lower-paid primary care or to serve poorer areas.
Medical schools will have no trouble filling seats– less than half of students who want to become doctors get into med school now. And top law schools should have no trouble meeting their enrollment numbers. But expensive, lesser known law programs will have to consider lowering tuition, says Austen Parrish, president of the Association of American Law Schools and the dean of the University of California, Irvine School of Law. That could be tricky, he adds, since prospective students often assume cheap programs aren’t as good.
Parrish also expects law schools to reconsider how they allocate aid to lower-income students. As opposed to granting a small number of stellar students full-ride scholarships, some schools might spread smaller scholarships to more students to fill in the gap between the new federal borrowing limits and school costs. “I do think every school is going to be doing some analysis as to whether there are ways they can still recruit the same high quality students by putting in more money throughout the ranks rather than as much at the very top,” he says.
Graduate degrees, and particularly master’s programs leading to less lucrative careers are another story. By Cohn’s figuring, 46% of all master’s of fine art students who borrowed exceeded the new $20,500 annual limit in 2019-2020, as did 31% of all master’s of social work students who borrowed. Says Kelchen: “The private market is not going to lend to a master’s in social work because even though the social return is high, the economic return is not.”
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