Gutting the Student Loan Program: The budget bill's assault on universities, students, parents--and gift for Wall Street

[Celerity]

https://prospect.org/blogs-and-newsletters/tap/2025-07-16-gutting-student-loan-program/



The Supreme Court’s unexplained ruling allowing the Trump administration to strangle the Education Department has gotten the headlines, but more insidious are the provisions in the budget bill undermining the student loan program. This hasn’t gotten nearly enough attention. The bill, signed July 4, reduces and caps the total amount that students and parents can borrow. It raises interest costs and shuts down or weakens programs that allow loan forgiveness based on income or public service employment. And for new student loans, it only offers two repayment plans, both of which are far more expensive than the current options. Some of this takes effect as late as 2028; other provisions are in force almost immediately.

Why is the administration doing this? Think of it as a Trump trifecta.

The move saves the government some money, which helps pay for Trump’s billionaire tax cuts. The ten-year savings are projected at about $355 billion. Nearly $300 billion of that savings comes from repealing income-based repayment plans, notably the Biden-era SAVE plan. In other words, the budget savings come directly out of the pockets of student borrowers. The administration is piling on this burden. For the 7.7 million people enrolled in the SAVE plan, who had benefited from a payment pause while right-wingers challenge that income-based repayment plan, interest collections will resume on August 1, the Department of Education announced. This will cost borrowers more than $3,500 a year.

But saving money is not the only goal. The cuts and caps are part of the general attack on higher education. If fewer students can afford college, more institutions will suffer declining enrollment and lost income, and more will cut back or shut down. The cuts to student loans also help Wall Street. The caps on direct federal loans force borrowers to turn to more expensive and deceptive private loans from banks and specialized student loan companies. One estimate is that half of all grad student borrowers will need to take out private loans. As my colleague David Dayen wrote in May, by gutting the Consumer Financial Protection Bureau (combined with the evisceration of the Education Department) the administration virtually eliminates recourse for students cheated by private lenders.

The fine print even discriminates against research and teaching. Under the revised program, all grad school loans are capped, but you can borrow more for a graduate professional degree than for one in the liberal arts. Students in law or medicine will be restricted to $50,000 per year with a $200,000 total cap. But “nonprofessional” areas, such as history or philosophy, have an annual cap of $20,500 and a lifetime limit of $100,000. (To be clear, even the $50,000 annual cap is lower than the cost of many professional graduate programs.) To some extent, the “mainstream” bipartisan sponsors of the current student loan program brought all this on themselves. The program was a fat target because of its bewildering complexity. One of the Trump administration’s main claims is that its policy changes simplify and streamline the system.

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[MichMan]

1. Wasn't one of the complaints about loans that students were being lent more $$$ then they could ever pay back?

and colleges kept charging more and more? Maybe this will force colleges to stop charging so much

[SickOfTheOnePct]

2. I'm wondering the same thing

Although there is a lot of negative stuff as part of the changes to the student loan program, a good thing that could come of it, in conjunction with more people who are looking to trade schools v. college, is that demand drops, which should lower tuition costs to some degree.

[JCMach1]

3. They will cut and shift costs even more to undergrads

There are many programs that cannot function without parallel grad programs