The newly passed “Big Beautiful Bill” made major changes to the higher education system, but probably the biggest win is the elimination of a little-known student loan program for graduate students.

The BBB rolled back or delayed many bad policies from the Biden administration, such as the SAVE student loan repayment plan and a couple of costly regulations. The new law also introduced a (pretty minimal) accountability system, expanded access to Pell grants, raised taxes on college endowments, and created a new student loan repayment program.

The elimination of Grad PLUS, however, is the true star of the bill’s higher education reform measures.

Grad PLUS was a type of student loan available for graduate students pursuing a master’s, doctoral, or professional degree. The program was a disaster, creating a gold mine for colleges while leaving students and taxpayers in the dust.

The Grad PLUS program hurt students in two ways.

First, colleges hiked tuition, confident that the loans would cushion the blow for needy students. It’s common for colleges to raise tuition to exploit financial aid programs, but Grad PLUS was arguably their favorite tool. A recent study found that the creation of Grad PLUS “led to significantly higher program prices … sticker prices went up approximately dollar for dollar with increases in federal loans.” That is, for each dollar loaned to a student, colleges increased tuition by basically the same amount.

Grad PLUS also harmed students by refusing to limit how much money they could borrow. Other student loan programs put a cap on annual and cumulative borrowing. For example, a typical undergraduate can’t borrow more than $7,500 per year or $31,000 over the course of their education (these figures are higher for non-traditional students). In contrast to these sensible limits, the only limit on Grad PLUS borrowing was what the college decided to charge.

As a result, overborrowing was very common for graduate students. In 2022, doctoral and professional degree recipients borrowed more money than they could expect to earn in a year. Their student debt was equivalent to 111% and 164% of their post-graduate annual earnings, respectively. Master’s degree recipients didn’t fare much better, with student debt equaling 68% of annual earnings post-graduation.

For bachelor’s degree recipients who did not have access to Grad PLUS, it was 56%.

Taxpayers also got the short end of the stick with Grad PLUS. Ironically, the program was originally created because the government believed it would make profits on the loans, which could be used to fund other spending projects. Government spending ballooned, but the anticipated Grad PLUS profits never materialized. Instead, the most recent estimate shows that taxpayers lose 24 cents out of every dollar lent through Grad PLUS. Given that around $200 billion of these loans would have been made over the next decade, eliminating Grad PLUS saved taxpayers around $50 billion.

It should also be noted that the elimination of Grad PLUS will not leave graduate students without the ability to borrow at all. These students will still have access to the standard student loan program, under which they can borrow up to $20,500 per year and $100,000 cumulatively. For professional degree students in fields like law and medicine, these figures are $50,000 per year and $200,000 cumulatively.

Colleges with graduate degree programs were the only ones that benefited from Grad PLUS. They were able to exploit the program to harvest financial aid funding, with students and taxpayers picking up the tab.

These colleges are predictably mourning the loss of this backdoor subsidy. But the rest of us should rejoice that Grad PLUS is no more.