Posted on 08/13/2025 10:51:55 AM PDT by karpov
Last month, a Republican Congress and President Trump achieved, if that is the word, a massive budget-reconciliation bill. As is more and more common, a Congress averse to accountability for particular votes crammed the measure full of many agenda items that the majority and the president wanted but chose to vote up or down on them as a package.
Several provisions are relevant to American higher education. They involve the student-loan program, in which the federal government provides both subsidized and unsubsidized loans to both graduate and undergraduate students. Federal grants to needy students, e.g. Pell grants, are only modestly affected, although the Biden Administration’s attempt to forgive much already incurred debt is for now canceled. The focus here is on changes to future student loans.
Such loans have been, for many years, guaranteed to colleges by federal-government entities. NPR reports that subsidies not directly given to undergraduates themselves but indirectly to universities to educate them are for now unaffected. But the subsidizing of graduate education is now limited to $20,500 annually, with a lifetime limit of $100,000.
The graduate-school PLUS program, which previously allowed borrowing up to whatever a university charged for graduate education, was eliminated.
The effect of the new loan provisions is best described as a good start. In elementary economic theory, borrowers look at the terms of a proposed loan and decide, based on its expected net return to them, whether it is worth taking out. The lender considers whether the loan’s expected return is worth the opportunity cost of making it. If that were all there were to it, private lending markets would function well enough: Loans expected to be profitable for the borrower and the lender would be offered and accepted.
(Excerpt) Read more at jamesgmartin.center ...
I haven’t seen where the Constitution empowered our government to be in the lending business.
As usual, a great column from the JG Martin Center.
<>Schools themselves should bear some of the costs, which they fail to bear now, of students who find themselves unable to repay what they owe. Currently universities reap all of the reward and bear none of the risk.<>
As always, in everything, follow the money.
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