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The Hill
4 days ago
- Business
- The Hill
GOP's proposed cap on grad student loans sparks fears of pricing out fields of study
Congress is on the verge of greenlighting new restrictions capping how much graduate students will be able to borrow from the federal government in a move that some worry will ice marginalized communities out of advanced degrees. As part of the megabill Republicans hope to pass this week to advance President Trump's agenda, senators included a ceiling on federal student loans for graduate, medical and law students as a way to combat the rising cost of college, arguing unlimited loans incentivizes colleges to raise their prices. Graduate students will only be able to borrow $20,500 a year, with a lifetime cap of $100,000. For professional students, including those studying law and medicine, they could borrow $50,000 a year with a lifetime cap of $200,000. But with some students unable to cover the full cost of an advanced degree without a government loan, advocates worry about students turning to private lenders or skipping out on an advanced degree altogether at a time when more jobs are requiring the additional education. 'There are two very likely outcomes of this. One is that more and more students will decide graduate school is not worth it and won't go at all despite the growing share of the workforce that requires some form of post-graduate education … Those will disproportionately be Black and Latino Americans. I would expect significant growth in the private lending market, those loans will most likely have higher interest rates and fewer borrower protections,' said Kyle Southern, associate vice president of higher education quality at The Institute for College Access & Success. The GOP-crafted provision would also eliminate the Graduate PLUS program, which allows students to cover the full cost of a post-graduate program. The pitch comes as Republicans have attached a slew of measures aimed at generating savings for the federal government in the nearly 900-page package they hope to pass this week. The reconciliation bill, which has already passed the Senate, is estimated to put trillions of dollars toward the nation's deficits over the next decade. Other changes to student loans programs in the bill including simplifying repayment plans down to two options and expanding Pell Grants to include workplace programs. Asked about the proposed grad student cap earlier this week, Sen. Bill Cassidy (R-La.), head of the Senate committee that crafted the proposal, told The Hill that 'if you allow more money to be borrowed, schools just raise their tuition more, and that's what we're trying to stop.' 'There's some suggestion that there's no recourse for people who cannot borrow as much as the school would have them borrow,' said Cassidy, who also worked as a gastroenterologist for years before serving in Congress. But with changes to Medicaid, a doctors' shortage and a lack of inflation-adjusted measures for the cap, others speculate this move will lead not only to fewer medical professionals but to harm for disadvantaged communities. 'Physician groups have warned that these changes could worsen doctor shortages, in combination with the proposed changes to Medicaid that could force rural hospitals to close. This legislation can have significant impact on access to health care, particularly for rural Americans. And furthermore, because these limits are not indexed to inflation, over time, they will gradually cover less and less of the total cost of attendance,' said Sara Partridge, associate director for higher education policy at the Center for American Progress. The price of college has risen sharply since the 1980s, with a report from Georgetown University estimating a 169 percent increase from 1980 to 2019. 'The biggest concern that I'm hearing is the graduate student loan cap,' Sen. Shelley Moore Capito ( who heads the subcommittee that oversees annual Education Department funding, told The Hill over the weekend. She said she's heard from 'graduate, particularly medical schools, dental school, concerned about that.' However, Capito, who ultimately voted for the bill, also noted cases where 'these professionals are coming out with such enormous debt that I think the schools need to work to try to rein in the cost there so it is more affordable.' Cassidy argued it is 'going to be a different mix' of how the plan would work for students. 'My family helped pay for my education,' he said. 'Some people worked while they went to school. Some people borrowed money independently of the federal program. Some people got scholarships.' 'Some people, and by the way, this is very doable, committed four years to working for either the Public Health Service or the military, and they got a total free ride. Now a total free ride, and those programs still exist,' he added. Democrats have sharply criticized the plan. 'On so many levels, it's problematic,' Rep. Jahana Hayes (D-Conn.), who serves on the House Committee on Education and Workforce, told The Hill on Wednesday. 'But if you're trying to have a professional pipeline, the people who are dentists and doctors, which we absolutely need, I mean, I'm an educator, and I think that you meet people where they are,' Hayes said. 'We absolutely need job training programs. We actually absolutely need skills training programs, but we also need people with professional degrees.' 'What this says, once again, is that only the people who can already afford it should be able to go to college,' she said. 'So what about low income communities with high achieving students who want to become get a professional degree and go back to their community, to be a dentist or a doctor or, you know, a social worker, the things that require graduate degrees and saying that, unless you can, can pay for it yourself.' Other critics say further options are available to Congress to rein in the cost of higher education. If an individual cannot cover the cost of their program with the cap on federal loans, experts posit they will go for private loans, which come with their own difficulties. Some would have difficulties getting a co-signer for a private student loan, and interest rates are higher. Additionally, despite being a much smaller portion of all student loans, 40 percent of student loan-related complaints to the Consumer Financial Protection Bureau are regarding private loans. 'There's certainly a legitimate conversation to be had about the affordability, especially of graduate education, and of the payoff on that return on investment. I do think that the disproportionate concern for high-cost, low-quality programs has been in the for profit college sector, and we've seen legal action taken as such. And so, if it was me making these decisions, I would take a more targeted approach to really addressing those kinds of deceptive practices and high cost, low outcome programs for students,' said Southern.
CNBC
15-06-2025
- Business
- CNBC
Senate Republican education plan may trigger 'avalanche of student loan defaults,' expert says
Senate Republicans' proposal to overhaul student loan repayment could trigger a surge in defaults, one expert said. The Senate GOP reconciliation bill's higher education provisions "would cause widespread harm to American families," Sameer Gadkaree, the president of The Institute for College Access & Success, said in a statement. The proposals do so by "making student debt much harder to repay" and "unleashing an avalanche of student loan defaults," he wrote. The Senate Committee on Health, Education, Labor and Pensions introduced bill text on June 10 that would change how millions of new borrowers pay down their debt. The proposal made only minor tweaks to the repayment terms in the legislation House Republicans advanced in May. More from Personal Finance:Experts weigh pros and cons of $1,000 Trump baby bonusHow Trump spending bill may curb low-income tax creditWhy millions would lose health insurance under House spending bill With control of Congress, Republicans can pass their legislation using "budget reconciliation," which needs only a simple majority in the Senate. Gadkaree and other consumer advocates have expressed concerns about how the new terms would imperil many borrowers' ability to meet their monthly bills — and to ever get out of their debt. More than 42 million Americans hold student loans, and collectively, outstanding federal education debt exceeds $1.6 trillion. More than 5 million borrowers were in default as of late April, and that total could swell to roughly 10 million borrowers within a few months, according to the Trump administration. Currently, borrowers have about a dozen plan options to repay their student debt, according to higher education expert Mark Kantrowitz. But under the Senate Republican proposal, there would be just two repayment plan choices for those who borrow federal student loans after July 1, 2026. (Current borrowers should maintain access to other existing repayment plans.) As of now, borrowers who enroll in the standard repayment plan typically get their debt divided into 120 fixed payments, over 10 years. But the Republicans' new standard plan would provide borrowers fixed payments over a period between 10 years and 25 years, depending on how much they owe. For example, those with a balance exceeding $50,000 would be in repayment for 15 years; if you owe over $100,000, your fixed payments will last for 25 years. Borrowers would also have an option of enrolling in an income-based repayment plan, known as the "Repayment Assistance Plan," or RAP. Monthly bills for borrowers on RAP would be set as a share of their income. Payments would typically range from 1% to 10% of a borrower's income; the more they earn, the bigger their required payment. There would be a minimum payment of $10 a month for all borrowers. While IDR plans now conclude in loan forgiveness after 20 years or 25 years, RAP wouldn't lead to debt erasure until 30 years. The plan would offer borrowers some new perks, including a $50 reduction in the required monthly payment per dependent. Still, Kantrowitz said: "Many low-income borrowers will be in repayment under RAP for the full 30-year duration." A typical student loan borrower with a college degree could pay an extra $2,929 per year if the Senate GOP proposal of RAP is enacted, compared to the Biden administration's now blocked SAVE plan, according to a recent analysis by the Student Borrower Protection Center. The Center included the calculations in a June 11 letter to the Senate Committee on Health, Education, Labor and Pensions. "As the Committee considers this legislation, it is clear that a vote for this bill is a vote to saddle millions of borrowers across the country with more student loan debt, at the same moment that a slowing economy, a reckless trade war, and spiraling costs of living squeeze working families from every direction," Mike Pierce, the executive director of the Center, wrote in the letter. Sen. Bill Cassidy, R-La., chair of the Senate Health, Education, Labor, and Pensions Committee, said the proposal would stop requiring that taxpayers who didn't go to college foot the loan payments for those with degrees. "Biden and Democrats unfairly attempted to shift student debt onto taxpayers that chose not to go to college," Cassidy said in a statement. Cassidy said his party's legislation would save taxpayers at least $300 billion.
CNBC
29-04-2025
- Business
- CNBC
Republicans release plan to overhaul student loan system, slash repayment plan options
House Education and Workforce Committee Republicans have released their plan to overhaul the country's student loan and financial aid system, calling for limits on student borrowing and a reduction to the repayment options for borrowers. The GOP measure, known as the Student Success and Taxpayer Savings Plan, is aimed at helping Republicans pass President Donald Trump's tax cuts. "For decades Congress has responded to the student loan crisis by throwing more and more taxpayer dollars at the problem — never addressing the root causes of skyrocketing college costs," committee chairman Tim Walberg, R-Mich., said in a statement. More from Personal Finance:Is college still worth it? It is for most, but not allHow to maximize your college financial aid offerWhat student loan forgiveness opportunities remain under Trump The proposal immediately triggered warnings from consumer advocates, who said the measures would deepen the affordability crisis families already face in paying for college. "The committee's current proposal would severely restrict college access by slashing financial aid programs, eliminating basic consumer protections and making it harder to repay student loan debt," said Sameer Gadkaree, the president and CEO of The Institute for College Access & Success. Here are some of the proposals in the Republicans' legislation. Under the proposal, undergraduate students would face a borrowing cap of $50,000 in federal student loans starting July 1, 2026, while graduate students couldn't take out more than $100,000. Current limits vary by factors including student status and year of schooling, but for many people, the caps will mean they can borrow less. Those limits "will shift some borrowing to private student loans," said higher education expert Mark Kantrowitz. That's a concern for Kantrowitz and other consumer advocates, who point out that private student loans come with far fewer borrower protections than federal student loans. The GOP proposal would reduce the number of existing income-driven repayment plans for new federal student loan borrowers to just one. IDR plans aim to make monthly payments affordable for borrowers by capping the bills at a portion of their discretionary income. More than 12 million people were enrolled in IDR plans as of September 2024, according to Kantrowitz. It would also eliminate the unemployment deferment and economic hardship deferment for federal student loan borrowers, on debt taken out during or after July 2025. Full eligibility for Pell Grants would also require students to be enrolled at a minimum of 30 hours each academic year, up from the current requirement of 12 hours per semester. The federal Pell Grant program, signed into law in 1965, is one of the largest sources of financial aid available to college students. More than 6 million undergraduate students received the grants in 2020. The maximum Pell Grant award is $7,395 for the 2025-26 award year. Meanwhile, the grants would be expanded for short-term workforce training programs.
Yahoo
20-03-2025
- Politics
- Yahoo
Trump signs order to eliminate Department of Education 'once and for all'
Following through on a longstanding campaign promise, President Trump signed an executive order Thursday ordering the Department of Education to wind down its operations so that it can eventually be closed. The order, while light on details, comes just one week after the agency announced plans for mass layoffs that would cut its workforce in half and leaves in question the fate of federal programs that touch on almost every aspect of American education, from distributing billions of dollars to K-12 schools to managing the government's massive student loan operation. During a ceremony in which he was surrounded by children seated at school desks, Trump said his administration was 'returning education to the states where it belongs.' He noted that key programs including Title I funding for schools that serve low-income communities, resources for disabled and special needs students, and Pell Grants for undergraduates would be 'preserved in full and redistributed to other agencies.' 'Beyond these core necessities, this administration will take all lawful steps to shut down the department,' he said. 'We're going to shut it down and shut it down as quickly as possible. It's doing us no good.' Education advocates have widely decried Trump's action, arguing that dismantling the department would sow chaos through the country's education system and hurt learners. 'Without the department, fewer students would be able to go to college, student loan borrowers would default in droves, and fraudulent colleges would prey on students with impunity,' Sameer Gadkaree, head of The Institute for College Access & Success, said in a statement. Conservatives argue those concerns are overblown, however. Frederick Hess, director of the Education Policy Studies Program at the American Enterprise Institute, noted that the administration is not planning to cut major funding streams for education, but rather is looking to change who manages them. 'Whatever happens to the department and the size of its bureaucratic staff, the impact on students, families, and colleges goers is likely to be pretty limited,' he said. What Trump wants to do Because the Education Department was created by statute, fully eliminating it would require an act of Congress. But it is widely expected that the administration will try to hollow out its operations by eliminating programs that aren't mandated by law and moving some of its core functions to other agencies. The order instructs Secretary of Education Linda McMahon to take 'all necessary steps to facilitate the closure of the Department of Education' to 'the maximum extent' permitted by law, while 'ensuring uninterrupted delivery of services, programs, and benefits on which Americans rely." Trump has previously said he wants to move federal student lending to another department, possibly the Treasury or Small Business Administration. Right-leaning experts have also suggested that the department's civil rights responsibilities could be reassigned to the Department of Justice, while funding for K-12 could be moved to the Department of Health and Human Services. Is any of this legal? It's not clear how much legal authority, if any, Trump has to scatter the Department of Education's responsibilities throughout the federal government. For instance, the Higher Education Act appears to state plainly that Federal Student Aid — the office that runs the Pell grant and student loan programs — must be established inside the agency, and that the Secretary of Education 'shall maintain responsibility' for creating the policies and regulations governing its operations. 'The law says it's the US Department of Education's Office of Student Aid, and I don't know how you get past that,' said Mike Pierce, director of the Student Borrower Protection Center. Federal law does allow agencies to run 'joint' projects together, and some conservatives have argued that language would let McMahon begin moving programs over to other departments. But transferring oversight of something the size and scope of federal student lending would be effectively unheard of and could prove tricky. Will it mess up my loans? Moving the student loan program would also risk major disruptions for borrowers, some former officials warned. If the transition were done sloppily, the government could end up losing track of information like how many payments individuals have made toward loan forgiveness. 'It's extraordinarily difficult to move loans across systems, even within the Department of Education,' said Julie Margetta Morgan, a former deputy undersecretary for education. 'The idea of moving them to another agency is just a massive, massive undertaking.' Much of the student loan program is already in a state of limbo, after the administration blocked access to its income-driven repayment plans — a decision many have criticized as an unnecessary overreaction to a federal court ruling. When it comes to higher education, much of the department's job involves managing giant contractors that handle tasks like servicing loans and processing student aid applications. Many of the department's key online systems and databases are built and run by those private companies. In theory, another agency could supervise those contractors, but it would require much of the same expertise and staffing that currently exists in the education department. At least some responsibilities could be handed off to other agencies with relative ease, former officials said. For instance, the Treasury Department already handles debt collection for much of the federal government and could probably take on that task for student loans. But one major concern is that the Trump administration will try to continue running programs like student lending without the oversight staff who make sure schools and servicers obey federal rules meant to protect students and borrowers. 'It's on the department to explain how it's going to work, to make the case that it's on top of oversight, and has a gameplan and has a plan for addressing those concerns,' said AEI's Hess. 'At this point, I don't think the department has made its case very fully.' Jordan Weissmann is a senior reporter at Yahoo Finance. Sign in to access your portfolio
