The Future of Graduate Student Loan Borrowing

As we head toward college graduation season, soon-to-be graduates are starting to plan their futures. While for many this will mean starting their careers, about 3 million students will enroll in graduate programs -- almost twice the number that pursued postbaccalaureate degrees in 1990 -- according to the National Center for Education Statistics.

The return on investment for the extended time in school is a no-brainer for many, but others will need to do some serious soul-searching and long-term financial planning before making the decision to take on the often significant student loan debt that can come with a graduate degree.

Some careers -- such as physicists, surgeons and dentists -- can generally expect a six-figure salary that can ensure their student loans are affordable; however, those pursuing more public service-oriented fields, such as teachers and public defenders, often find themselves having to choose between their passion and their long-term finances.

[Find out how to weigh the cost and benefits of graduate school.]

Thankfully, over the past decade, federal financial aid policies have made it easier for students pursuing such fields to not only afford their graduate school but also manage the resulting debt. The aggregate Stafford loan limit for graduate students is a generous $138,500, including any undergraduate Stafford loans a student may have borrowed.

If that isn't enough, graduate students have access to Graduate PLUS loan amounts that are only limited by the cost of their education minus any other aid. This federal loan policy ensures that anyone wanting to pursue a graduate degree is not barred from doing so based on his or her economic status.

To ensure that those with a passion for public service can pursue those fields and still afford their student loan payments, Congress has introduced several income-driven repayment options over the last decade or so, as well as a program signed into law in 2007 called Public Service Loan Forgiveness. These options not only keep federal student loans affordable but also forgive the balance after a certain number of years.

[Look at this side-by-side comparison of three income-based repayment plans.]

The problem with these programs is that they're expensive. The Government Accountability Office predicts that the cost to taxpayers for the PSLF program alone will be more than $80 billion. The other issue is that these programs may have resulted in a disincentive for students to keep their borrowing at affordable amounts.

With these issues in mind, both the former and current administrations have discussed policy changes to the PSLF and income-driven programs that could affect future students. There has also been some recent chatter about changes to the Graduate PLUS loan program that could make postbaccalaureate programs unaffordable for some students altogether. Given all of this, here are some possibilities graduate students could possibly anticipate.

For several years, the Obama administration and some members of Congress have proposed capping the forgiveness under the PSLF program at the current undergraduate federal student loan limit of $57,500. In recent years, Republican s proposed eliminating PSLF altogether for new borrowers.

[Read about what DeVos might do with student loans.]

The Student Loan Ranger predicts that it is more likely than not that PSLF will be capped, probably at the undergraduate loan limit, for new borrowers who take their first loan after any such legislation is signed. This could be as early as fall 2017 if the proposal is included in the next round of budget discussions or if Congress makes progress on the reauthorization of the Higher Education Act at the end of this year or next. There is a chance they will make the more drastic change of cutting the program altogether, but we hope at this point that this is less likely.

As for Graduate PLUS loans, we've been hearing and reading chatter that some Republicans think graduate school borrowing should be pushed over to the private market altogether. The thought process is that this would help curb subsidy costs to taxpayers, while allowing private lenders and schools to help determine how much debt makes sense for students pursuing certain fields of study.

We're concerned that such a policy would bar many lower and middle-income students from graduate school because of the much higher credit criteria required for private loans. Such policies could also be a disincentive to those who wish to pursue lower - income-generating public service fields, such as education or social work.

If you are considering graduate school in the next year or two, you probably don't have too much to worry about , since any drastic policy changes such as these are unlikely to be implemented in that time frame. With that said, you should never borrow with the assumption of loan forgiveness, and it's imperative that all students do some serious research on the return on investment for their chosen schools and fields of study before pursuing graduate school .

Betsy Mayotte, director of consumer outreach and compliance for American Student Assistance, regularly advises consumers on planning and paying for college. Mayotte, who received a B.S. in business communications from Bentley College, responds to public inquiries via the advice resource "Just Ask" and is frequently quoted in traditional and social media on the topics of student loans and financial aid.