Enrollment in some graduate education and healthcare programs at Oregon’s public universities is expected to be down this fall, in part because students who might have enrolled face confusion and uncertainty over whether they can get the federal loans they need to attend, according to school leaders.
The issue stems from new rules congressional Republicans passed last summer in their massive tax and spending cut bill, which caps the amount of federal student loans graduate students can borrow from the U.S. Department of Education. They allowed for higher caps on some degree programs, such as those for doctors and dentists, but did not include many high-demand, high-cost medical and education degree programs, such as nursing, physical therapy, social work and counseling.
That’s because higher loan limits don’t make sense for professions that make less money.
Republicans hope loan caps can, over the next few years, spur universities to lower graduate tuition costs, which have risen considerably over the past four decades as unrestricted borrowing from the federal education department rose, and states pulled back public university funding in the nearly two decades since the 2008 recession. A 2020 Brookings Institute study found that graduate students held about half of all outstanding student loan debt despite making up about one-quarter of borrowers.
This is to say nothing of the fact that the government shouldn’t be in the business of making students loans in the first place. If schools want to take on the risk of funding their students, they should. If banks want to take on that risk—a job for which they are ideally suited compared to the government—they should. What should not happen is what has been happening: The government writing essentially a blank check to colleges and universities via students who are on the hook for the loans, backstopped by the government if they default. The consequence of this arrangement has been, as the article states, a massive rise in tuition across decades, because there is no financial liability to the schools themselves.
But none of the university leaders in Portland at a Tuesday panel convened by Portland-area U.S. Rep. Suzanne Bonamici, a Democrat representing Oregon’s 1st Congressional District, said the move would cause graduate tuition to decline at their institutions. Instead, they said, would-be students will likely take on private loans with higher interest rates than federal loans, or forgo programs altogether.
Of course “university leaders” are upset about their funding spigot being turned down. But I don’t believe for a minute that graduate tuition won’t decline.
…Dr. Susan Bakewell-Sachs, dean of OHSU’s School of Nursing, said incoming students have already told financial aid officers that they don’t have cosigners for private loans they think they need to take out to supplement what is expected to be inadequate federal loan amounts. Others have said they’re struggling to figure out how they would be able to afford the interest rates on private loans, often up to three times more than interest rates on federal loans.
What this tells us is that the government is making loans that banks would never make, taking on risk that the financial institutions—whose job it is to calculate risk—won’t take on.
Graduate student loan borrowers were previously allowed to borrow the full cost of tuition for their degree programs. Under the changes, annual borrowing would be capped at $20,500 per year with a total $100,000 limit, unless the program is a “professional” program, which includes 11 specific categories such as medical doctor and dentist but doesn’t include nursing. For those professional programs, borrowers can take out $50,000 a year in loans, with an overall $200,000 cap.
Republicans defending the caps have argued that many academic programs come with unjustifiably high price tags given the jobs and salaries that exist for their graduates.
The GOP is exactly right.
Bakewell-Sachs said that logic doesn’t make sense for nursing, where demand is high and earnings post-graduation are high enough to justify the average $40,000 to $45,000 of debt that most nurses leave school with.
Actually, the numbers of line up great. Nursing is a two-year program so at $20,500 a year, that’s $41k—right in the ballpark of what people are graduating with now on average. Capping this at $100k (in case the program takes more years) is still reasonable. What’s not reasonable is a debt burden substantially above that, which is exactly the situation the GOP is trying to avoid (both for the benefit of the taxpayers and the students themselves).
Many university leaders said they’re most concerned that limiting loans will result in fewer first-generation and low-income college students enrolling in graduate education and medicine programs, leading to a lack of diversity in fields that need more of it.
This is “lack of diversity” angle is particularly galling given that 48% of student loan repayment delinquencies are from minorities. I’m not sure any group has been hurt more by taking on huge student loans.
But all this is downstream of my first point: The federal government shouldn’t be in the business of student loans in the first place.