Capping Graduate Lending: A Tailwind for Student Loan ABS Supply
The One Big Beautiful Bill Act (OBBBA) has the potential to increase student loan ABS issuance beginning in July 2026 by creating a structural funding gap in graduate education. By capping federal borrowing and eliminating Graduate PLUS (Grad PLUS) for new borrowers, the legislation will shift incremental loan demand toward private lenders—some of which rely on securitization as a core funding source. In this report, we examine the size of the funding gap and discuss how the legislation could drive higher student loan ABS new issue volumes.
Key Takeaways
The OBBBA is likely to create a structural funding gap of approximately $10 billion-$12 billion per year in graduate education, as new federal loan caps and the elimination of Grad PLUS for new borrowers constrain borrowing capacity, particularly in high-cost professional programs.
We do not expect displaced federal borrowing to convert one-for-one into private lending, reflecting the fact that private student lenders…
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