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UPI
a day ago
- Business
- UPI
Proposed federal budget would limit access to student loans
Students take photos in their caps and gowns at Columbia University in New York City on April 26, 2024. File Photo by John Angelillo/UPI | License Photo June 28 (UPI) -- The latest version of the Senate's federal budget reconciliation bill would limit the availability of student loans for future borrowers by revising federal student loan programs and regulations. The budget bill that already has passed the House of Representatives and the Senate version would place a maximum amount on how much people could borrow through the federal Parent PLUS and graduate student loans to help them pay for their college educations. The House-approved version would limit undergraduate borrowing to $50,000, while the Senate version would limit that amount to $65,000. Graduate students would see limits of $100,000 for most master's programs, while the borrowing limit for professional degrees would be $150,000 in the House version and $200,000 in the Senate bill. Supporters of the proposed limits say they could save taxpayers more than $300 billion and make it harder for college and university administrators to raise tuition costs and fees. Opponents say it would make it harder for disadvantaged students to attend college. "It's abundantly clear that the budget reconciliation package would reduce access to higher education and healthcare and jeopardize [the University of California's] ability to carry out its public service mission," Chris Harrington, U.C. associate vice president for Federal Governmental Relations, said on Monday in a letter to the state's House delegation in May. The House-approved bill would eliminate Pell Grants for part-time students, subsidized loans for undergrads and Graduate PLUS loans for graduate and professional students, according to the University of California. It also would limit eligibility for Supplemental Nutrition Assistance Program and Medicaid benefits for low-income students. The Senate's version of the proposed fiscal year 2026 budget reconciliation bill numbers 940 pages and might be voted on as soon as Saturday night.
Forbes
07-05-2025
- Business
- Forbes
Examining The Potential Impacts Of Proposed Higher Education Funding Reforms
Graduation mortar board cap on one hundred dollar bills concept for the cost of a college and ... More university education getty The Republican Education Committee has recently unveiled its proposals for student aid reform in 2025, outlining several significant changes to federal student loan programs, Pell Grants, and institutional accountability measures. These proposals aim to address rising student debt, improve educational outcomes, and reduce federal spending on higher education. This analysis examines each major proposal, presenting arguments from supporters and critics, along with evidence from research and experience to evaluate potential outcomes. The committee proposes eliminating the Graduate PLUS loan program, which currently allows graduate students to borrow up to the full cost of attendance minus other financial aid received. Proponents, including fiscal conservatives and some higher education reformers, argue that unlimited federal lending for graduate education has enabled program cost inflation and encouraged students to pursue degrees with questionable return on investment. Graduate PLUS loans have created a perverse incentive for universities to raise tuition with little incentive to cut costs and expenses. A significant portion of the student debt crisis stems from graduate education. According to the Brookings Institution, graduate students represent just 19% of federal student loan borrowers but account for approximately 40% of outstanding federal student loan debt. Many graduate programs, particularly online offerings, have leveraged federal loans to charge premium prices for degrees that may not deliver commensurate value in the job market. As documented in Forbes, some master's degrees have become modern "ripoffs," with students accumulating six-figure debt for credentials offering minimal salary premium. Supporters believe capping graduate lending could force institutions to reduce tuition costs to match what students can reasonably afford to borrow through other means. Critics, including many university administrators, student advocacy groups, and professional associations in fields like education and healthcare, contend that eliminating Graduate PLUS loans could have severe unintended consequences. This proposal would reduce access to graduate education for low- and middle-income students. particularly at historically underserved populations and those pursuing careers in public service. Critics highlight several potential negative outcomes. For one, students may be forced into the private loan market, which typically offers less favorable terms, higher interest rates, and fewer protections than federal loans. As Adam S. Minsky reported in Forbes, 'Eliminating the Graduate PLUS program would mean that borrowers who cannot cover the cost of their graduate school education may need to rely on which are generally riskier, tend to have higher interest rates, and are ineligible for federal student loan forgiveness and relief programs.' The change could also exacerbate shortages in critical fields like teaching, nursing, social work, and public health—professions that require graduate degrees but offer modest starting salaries. The American Association of Colleges of Nursing estimates the U.S. will need over 200,000 new registered nurses annually through 2030 to address existing shortages. Historically Black Colleges and Universities (HBCUs), Tribal Colleges, and institutions serving predominantly low-income students could face existential threats if their graduate programs become unaffordable to their traditional student populations. Balanced Assessment The elimination of Graduate PLUS loans represents a significant market correction that could help address runaway tuition inflation in graduate education, particularly for online programs and degrees with questionable labor market value. However, implementation without complementary policies could restrict educational access for underrepresented groups and exacerbate shortages in critical public service professions. A more balanced approach might include program-specific loan limits based on expected post-graduation earnings, preserving higher caps for fields with demonstrated social value but lower compensation. Additionally, expanding income-driven repayment options specifically for public service careers could mitigate negative impacts while still introducing market discipline to graduate education pricing. Reduction of Repayment Plans to Two Options The Proposal The proposal would streamline the current array of income-driven repayment plans (IDR) to just two options: a standard 10-year repayment plan and a single income-driven option requiring payments of 15% of discretionary income for 20 years (25 years for graduate debt)and a new Repayment Assistance Plan (RAP) which would base monthly payments on a borrower's total adjusted gross income, with payments ranging from 1 to 10 percent of income. The plan also includes a minimum monthly payment of $10 and may offer balance assistance by waiving unpaid interest and providing a matching payment-to-principal. Supporter Arguments Advocates, including fiscal conservatives and some education policy experts, argue that the current system's complexity creates confusion and inefficiency. Supporting evidence includes a 2022 Government Accountability Office report finding that approximately 7.8 million federal student loan borrowers were eligible for loan forgiveness through income-driven repayment but weren't enrolled due to complexity and communication failures. Supporters also argue that the current SAVE plan is fiscally unsustainable. The Penn Wharton Budget Model estimates that the SAVE plan could cost taxpayers over $475 billion over the next decade, substantially higher than previous projections. Preston Cooper, writing for Forbes is highly supportive of the elimination of negative amortization. 'The new repayment plan is earthshaking. For borrowers who make on-time payments, RAP ends the phenomenon of rising balances because payments are insufficient to cover interest. Such negative amortization has been the Achilles heel of current income-driven repayment plans, wherein three-quarters of borrowers see their balances rise over time, according to the Congressional Budget Office…Borrowers who see their balances consistently drop, month after month, will be more willing to remain engaged with their loans.' Critic Arguments Critics, including student advocacy organizations, progressive policy groups, and some labor unions, contend that eliminating more generous repayment options like SAVE would increase financial hardship for borrowers. It provides crucial relief for lower-income borrowers and those working in public service, and its elimination has increased borrowers payments by hundreds of dollars. The Institute for College Access and Success estimates that a single parent earning $45,000 with $30,000 in undergraduate debt would see their monthly payments increase from approximately $0 under SAVE to around $250 under the proposed plan. Balanced Assessment Simplification of repayment options offers clear administrative benefits and could improve borrower understanding of their obligations. However, the specific parameters of the proposed income-driven option would substantially increase payment amounts for low- and middle-income borrowers compared to the most generous current options. A compromise approach might maintain simplification while adjusting the income-driven repayment formula to provide more relief for borrowers at lower income levels. Progressive payment percentages (increasing with income) could balance fiscal sustainability with borrower protection. Pell Grant Funding with Credit Requirements The Proposal The proposal would increase Pell Grant funding but establish minimum credit hour requirements for eligibility, potentially requiring students to enroll in more courses each term to receive the full grant amount. Supporter Arguments Proponents, including some education policy researchers and institutional leaders, argue that credit hour requirements would incentivize timely degree completion and improve graduation rates. Research shows that students taking 15 or more credits per semester are more likely to graduate and typically have better academic outcomes than those taking lighter course loads. Additionally, faster completion reduces the total cost of education by limiting the number of terms students must pay for housing, transportation, and other non-tuition expenses. Critic Arguments Critics, including community college administrators and advocates for non-traditional students, warn that rigid credit requirements could harm working adults, student parents, and those facing significant economic many low-income students, taking 15 credits per term is simply not feasible." According to the Institute for Women's Policy Research, nearly 5 million college students are raising children, and these student parents are disproportionately women and people of color. These students often cannot take full course loads due to caregiving responsibilities and work obligations. Balanced Assessment While encouraging faster degree completion through credit incentives has merit, rigid requirements could create barriers for non-traditional students who comprise a growing share of the undergraduate population. A modified approach might include sliding-scale benefits that provide some support for part-time students while still incentivizing higher credit loads when possible. Complementary policies such as expanded childcare support, flexible course scheduling, and targeted academic support services would be necessary to ensure that credit requirements do not disproportionately harm the students most dependent on Pell funding. Institutional Risk-Sharing Proposal The Proposal Under this proposal, colleges and universities would be required to repay a portion of defaulted student loans, essentially sharing financial responsibility for student loan outcomes with the federal government and borrowers. Supporter Arguments Advocates, including education reform organizations and some fiscal conservatives, argue that risk-sharing would align institutional incentives with student success and loan repayment outcomes. Evidence from sectors with similar accountability measures suggests that risk-sharing can drive institutional improvement. For instance, after gainful employment regulations were implemented for for-profit colleges, many institutions preemptively closed underperforming programs and reduced tuition in others to improve outcomes. A Brookings Institution analysis found that institutional risk-sharing could potentially reduce default rates by 2-3 percentage points by incentivizing colleges to improve student support services, career preparation, and financial counseling. Critic Arguments Critics, including many higher education associations and advocates for minority-serving institutions, warn that risk-sharing could disproportionately harm colleges serving higher-risk student populations. Critics point to evidence that default rates correlate strongly with student demographics rather than institutional quality. According to the Center for American Progress, Black bachelor's degree recipients default at five times the rate of white bachelor's degree recipients, even when attending the same institutions. Small, under-resourced institutions serving first-generation, low-income, and minority students would face the greatest financial burden under risk-sharing, potentially forcing closures or causing these schools to restrict access to higher-risk students. Balanced Assessment Institutional accountability for student outcomes represents a promising approach to improving higher education value, but implementation must be carefully designed to avoid unintended consequences. An effective risk-sharing program would need to: Adjust expectations based on student demographics and institutional mission Phase in gradually to allow institutions time to adapt Provide technical assistance and support for improvement Include complementary investment in under-resourced institutions serving high-need populations Without these safeguards, risk-sharing could accelerate the closure of struggling but socially valuable institutions like Northland College in Wisconsin, which recently announced its closure despite its distinctive environmental mission and regional importance. Elimination of the 90/10 Rule and Borrower Defense Provisions The Proposal The proposal would eliminate the 90/10 rule (requiring for-profit colleges to obtain at least 10% of revenue from non-federal sources) and scale back borrower defense to repayment provisions that allow students to seek loan forgiveness if their institutions engaged in misconduct. Supporter Arguments Proponents, primarily for-profit college advocates and some conservative policy organizations, argue that these regulations unfairly target proprietary institutions and limit educational innovation. Supporters contend that for-profit institutions often serve students overlooked by traditional higher education, including working adults, veterans, and minority students. According to the National Center for Education Statistics, for-profit colleges enroll higher percentages of low-income, minority, and first-generation students than many non-profit institutions. Regarding borrower defense, supporters argue that the current rules are overly broad and expose taxpayers to excessive liability for claims that may be difficult to verify or adjudicate consistently. Critic Arguments Critics, including consumer protection groups, veteran organizations, and state attorneys general, strongly oppose these changes, arguing they would remove crucial guardrails against predatory practices. The 90/10 rule and borrower defense provisions represent the bare minimum of consumer protection in a sector with a well-documented history of abuses Evidence of misconduct in the for-profit sector is substantial. A 2020 Veterans Education Success report found that 86 for-profit colleges received over $1.15 billion in GI Bill funds while simultaneously being under investigation by state or federal agencies for deceptive practices or other violations. The Department of Education has approved billions in borrower defense claims for students from institutions like Corinthian Colleges, ITT Technical Institute, and DeVry University after finding evidence of widespread misrepresentation. Balanced Assessment The elimination of the 90/10 rule and weakening of borrower defense provisions would remove important consumer protections with little countervailing benefit. While some for-profit institutions provide valuable educational services, the sector's documented history of abuses suggests that stronger rather than weaker regulation may be appropriate. A more balanced approach might involve refining these regulations to reduce unintended consequences while maintaining core protections. For instance, the 90/10 rule could be applied more broadly across all institutional types, while borrower defense processes could be streamlined while preserving meaningful relief pathways for defrauded students. Best and Worst Case Scenarios Best Case Scenario In the most optimistic projection, these reforms could: Introduce needed market discipline to graduate education, forcing institutions to reduce costs and focus on programs with demonstrable value Simplify loan repayment, making it easier for borrowers to understand their options Accelerate degree completion through credit incentives Improve institutional accountability by aligning financial incentives with student outcomes Reduce federal spending on higher education without significantly compromising access This scenario would require institutions to adapt quickly by streamlining operations, reducing administrative costs, improving student support services, and focusing resources on high-value programs. The higher education landscape would likely see consolidation, with stronger institutions absorbing students from weaker ones that cannot adapt. Worst Case Scenario In a more pessimistic projection, these reforms could: Precipitate a wave of college closures, particularly among institutions serving underrepresented populations Create severe shortages in critical fields like nursing, teaching, and social work Force students into predatory private lending markets Reduce educational access for working adults, student parents, and low-income students Allow a resurgence of predatory practices in the for-profit education sector Exacerbate existing inequities in higher education access and outcomes This scenario would result if the speed and magnitude of changes overwhelm institutions' capacity to adapt, particularly those with limited financial reserves and endowments. Conclusion The Republican Education Committee's proposals for student aid reform in 2025 represent a significant shift in federal higher education policy. While some elements—particularly those addressing graduate education costs and institutional accountability—have merit, the package as currently constituted lacks sufficient safeguards and transitional provisions to protect vulnerable students and institutions. A more balanced approach would maintain focus on affordability, efficiency, and outcome accountability while incorporating: Program-specific loan limits for graduate education rather than elimination of Graduate PLUS loans Progressive income-driven repayment formulas that protect low-income borrowers Flexible Pell Grant requirements that accommodate non-traditional students Risk-sharing provisions adjusted for student demographics and institutional resources Maintained consumer protections against predatory practices As these proposals move through the legislative process, refinements addressing these concerns would create a stronger, more equitable system of higher education financing that serves students, institutions, and taxpayers alike.
