To unveil how the brain learns, ongoing work seeks biologically-plausible approximations of gradient descent algorithms for training recurrent neural networks (RNNs). Yet, beyond task accuracy, it is unclear if such learning rules converge to solutions that exhibit different levels of generalization than their non-biologically-plausible counterparts. Leveraging results from deep learning theory based on loss landscape curvature, we ask: how do biologically-plausible gradient approximations affect generalization? We first demonstrate that state-of-the-art biologically-plausible learning rules for training RNNs exhibit worse and more variable generalization performance compared to their machine learning counterparts that follow the true gradient more closely. Next, we verify that such generalization performance is correlated significantly with loss landscape curvature, and we show that biologically-plausible learning rules tend to approach high-curvature regions in synaptic weight space. Using tools from dynamical systems, we derive theoretical arguments and present a theorem explaining this phenomenon. This predicts our numerical results, and explains why biologically-plausible rules lead to worse and more variable generalization properties. Finally, we suggest potential remedies that could be used by the brain to mitigate this effect. To our knowledge, our analysis is the first to identify the reason for this generalization gap between artificial and biologically-plausible learning rules, which can help guide future investigations into how the brain learns solutions that generalize.