As total outstanding student loan debt continues to grow and the public is confronted with shocking, though atypical, stories about students with upward of $100,000 in student loan debt, some lawmakers have targeted the federal student loan program catering to graduate and professional students. But a new report from AccessLex Institute argues that proposals to cap or eliminate the Grad PLUS Loan program are unnecessary.
In the report, the authors claim that limiting or eliminating the Grad PLUS program would go against the core principles of the Higher Education Act (HEA): expanding access to higher education. The report examines data on borrowers in the Grad PLUS program, and finds that less than 9% of the more than 810,000 graduate degree recipients in 2015-16 took out a Grad PLUS loan and had a high debt load of more than $100,000.
“Policymakers must keep HEA’s purpose at the forefront of their minds before considering any changes to the program. Failure to reform the program without ensuring access is maintained could result in significant unintended consequences,” the report said. “Changes that are not rooted in data or do not align with program goals will create problems more detrimental than the issues any of the proffered changes would be intended to cure.”
Throughout the report, the authors suggest that proposed changes to the program may be driven more by anecdotes than by data. They argue that graduate education holds an important role in society and more often than not leaves degree holders with lower unemployment rates and higher earnings.
The authors also set out to debunk a theory known as the Bennett Hypothesis, which claims that increased financial aid has led to increases in tuition and fees. The hypothesis has been used to argue that Grad PLUS allows institutions to continually increase tuition and fees because it allows students to borrow an “unlimited” amount of money.
“While Grad PLUS does not have annual or aggregate loan limits like the Direct Unsubsidized loan program, students would have to perpetually enroll in graduate programs to effectively borrow ‘unlimited’ funds,” the report said. “There is no evidence that the practice of intentionally amassing federal student loan debt to obtain multiple advanced degrees is a substantially significant portion of graduate students, let alone widespread.”
Over the decade from 2005 to 2015, the report said, tuition for master’s and research doctoral programs increased at a steady rate, from $21,530 to $25,160 at private nonprofit institutions—an increase of 17% over 10 years.
“Because Grad PLUS was created in 2005, if the Bennett hypothesis held true, one would expect graduate tuition to skyrocket in the intervening years since its inception,” the authors wrote. “This simply has not happened.”
The report also takes issue with claims that the loan program will come at a cost to taxpayers, saying many conflate the loan program with income-driven repayment plans and the Public Service Loan Forgiveness (PSLF) program. On its own, the report said, Grad PLUS is actually profitable to the government due to higher interest rates, high repayment rates among borrowers, and low default rates on these types of loans.
The authors estimate that the percentage of Grad PLUS borrowers who could potentially receive substantial loan forgiveness is relatively low. Of the roughly 810,000 graduate degree recipients in 2015-16, just 72,000, or 9%, would be high-debt borrowers with the potential for substantial loan forgiveness.
However, even that analysis may overestimate how many borrowers would be eligible for substantial forgiveness, the report said. The analysis assumes everyone will enroll in an income-driven repayment plan. Previous research from the Government Accountability Office has shown that most Grad PLUS borrowers enroll in the standard 10-year repayment plan, while just 36% as of June 2017 had ever participated in an income-driven plan.
“Changes to Grad PLUS must not come at the expense of students. Making it more difficult for students to secure financing for their advanced degrees, thereby reducing access and weakening America’s workforce, would take us in the wrong direction,” the report said. “Congress must ensure that policy proposals seeking to modify Grad PLUS are always grounded in the fundamental purpose of HEA: expanding access.”
Publication Date: 4/18/2019