Republicans Push for Limits on Grad School Loans

"A proposal put forward by House Republicans to place tighter limits on federal student loan borrowing by graduate students would be likely to 'severely depress the market' for advanced degrees — especially among students who aren't working or getting tuition breaks as teaching assistants or researchers," according to Credible.

"That's according to Jeffrey Selingo, a higher education policy wonk who says graduate school has already lost some of its allure, thanks to tuition increases and the rise of alternatives like coding boot camps and 'MicroMasters' programs.

Writing for The Washington Post's Grade Point blog, Selingo says that although interest in advanced degrees in some well-paid fields like computer science, engineering, and health sciences remains strong, overall grad school enrollment has plateaued.

Demand in other areas, such as for master's degrees in business administration (MBAs), has largely been propped up by international students, he says.

... Conservatives worry that taxpayers will end up footing the bill as more borrowers — particularly grad students who often have six-figure student loan debt — rush into income-driven repayment programs that can provide loan forgiveness after 10, 20 or 25 years of payments.

The PROSPER Act would close the door for future borrowers to enroll in income-driven repayment programs that offer such 'time-based' forgiveness. But the bill would create a new income-driven repayment plan with limits on total interest charges that would save many borrowers more money in the long run (see analysis below).

To keep graduate students from taking on so much debt in the first place, the bill would also phase out their access to federal PLUS loans. Many might be forced to turn to other sources of funding, such as private student loans.

... Up-front fees on federal loans also add to their cost. The 4.264 percent up-front fee on PLUS loans, for example, adds about a full percentage point to the annual percentage rate (APR) paid by borrowers.

One aspect of the PROSPER Act that's been welcomed by colleges and student advocates is a proposal to do away with the up-front fees on all federal student loans.

According to the National Association of Student Financial Aid Administrators, those upfront charges cost the average undergraduate $235 in fees and interest, and the average graduate student $1,145.

The fees, which are currently 1.066 percent for federal direct loans, and 4.264 percent for federal PLUS loans, generate $1.6 billion a year in revenue for the government. Much of that money — $628 million – comes out of the pockets of graduate students."

NASFAA's "Headlines" section highlights media coverage of financial aid to help members stay up to date with the latest news. Inclusion in Today's News does not imply endorsement of the material or guarantee the accuracy of information presented.


Publication Date: 2/7/2018

View Desktop Version