Apr 03, 2019 |

Trump higher ed plans include new cap on student loans and boosting for-profits

“Congress is already signaling that its big legislative priority for the year is reauthorizing the Higher Education Act—and the Trump White House is already complicating it. In a recently released set of priorities, the Trump administration laid down its opening bid: It wants to set limits on the amount of loan money students can borrow and overhaul the current system to accredit colleges and universities.”

—Trump’s vision for higher education is limiting student loans and prioritizing for-profit colleges, Vox

It seems like everyone has a take on ending the student debt crisis, from fintech companies competing to refinance your loans to presidential hopefuls campaigning on free college. One thing that could make a real difference to college-bound students is Congressional reform on the issue, and it’s long overdue—the Higher Education Act (HEA), which expanded low-interest federal student loans in the mid-1960s, hasn’t been updated since 2008.

A bipartisan HEA re-up has been in the works in the Senate for years, with Lamar Alexander (R-Tennessee) and Patty Murray (D-Washington) now leading the effort. But the Trump Administration’s recently announced higher ed agenda could set some troubling precedents, especially for those looking to help students and families afford college and avoid exploitation by for-profit schools.

It’s far from a done deal that Trump’s priorities will be written into law. Senators Murray and Alexander have a history of bipartisan collaboration, but their parties have deep disagreements over education spending. The revised HEA would also have to be amenable to the Democratic-controlled House, where it’s subject to approval. Yet the Trump Administration’s vision may drive Republican input on the plan, and with the current president’s penchant for executive orders, anything could be on the table. Here’s how some of the Trump administration’s proposals would impact the bottom line for students.

A cap on federal loans

Trump’s major reform would be an overall limit to certain federal loan dollars. Currently, federal Direct Loans (or Staffords) for undergraduate education are capped at $31,000 for most students, whereas federal Parent PLUS and Grad PLUS loans have no hard cap—you can basically borrow as much as you need. Both PLUS loans have been (fairly) linked with untenable debt loads for families borrowing on their kids’ behalf and people pursuing graduate degrees, respectively. Yet, as Democrats argue, setting limits on PLUS loans, as has been proposed, could disadvantage low-income students, who would be left instead to turn to higher-rate private loans. Republicans and Democrats crafting the HEA overhaul are also likely to disagree about increasing the amount of money given out to low-income students through Pell Grants—which have remained disproportionately low for decades even as college costs have skyrocketed. If Pell Grants don’t rise (a Democratic priority), a limit on federal borrowing would be even more troubling.

One repayment plan—with forgiveness for all

The Trump Administration’s priorities also includes a seemingly radical provision: a single income-driven federal loan repayment plan, with monthly payments capped at 12.5% of discretionary income and all remaining undergraduate debt forgiven after 15 years. (Discretionary income is what you make each year minus 150% of the poverty line for your state.) It would replace Public Service Loan Forgiveness, the program that, in theory, wipes away debt for qualified public service and nonprofit workers after 10 years. More than a decade in, potential PSLF recipients have been plagued by myriad bureaucratic obstacles, with nearly all applicants being rejected. Given the track record of this similar program, it seems incredibly risky to extend relatively short-term loan forgiveness to millions more borrowers. (Several existing repayment plans offer forgiveness after 20 to 25 years.)

More for-profit protections

A third major proposal is right in line with Education Secretary Betsy DeVos’s agenda for higher education: Streamline the college accreditation system to make it easier for for-profit schools to flourish. This move would eliminate the distinction between regional accreditors—which have high standards and provide accreditation to legitimate public and private not-for-profit schools—and so-called “national” accreditors, which function to legitimize many for-profit institutions.

The final word, for now

There’s no way to know what will, or won’t, be included in the final HEA reauthorization. The academic community has braced in the past for proposed reforms that didn’t happen, like taxation on graduate tuition awards (which was initially included in the Republican tax overhaul). Yet this period of uncertainty is nothing if not a reminder to be a smart consumer when it comes to college financing. Talk about what your family can afford, and consider low-cost local and in-state schools. And it always bears repeating: Avoid for-profits, because in the current political climate, they’re more empowered than ever to dupe you into signing up for a useless degree.