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Grad School Loan Caps

28:40 recording · EN · 7 speakers

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Brief overview

Capping federal grad school loans to force tuition down rests on evidence that is decidedly mixed.

  1. Grad school, not undergrad, drives the debtNet undergraduate price has been roughly stagnant for 10 years, while grad school net tuition ballooned and makes up a huge chunk of the $1.7 trillion portfolio.
  2. The research points in two directionsDenning measured a 64-cent price rise per extra loan dollar in Texas; Kelchin found no such link across business, medical and law schools nationally.
  3. Borrowers carry the message to the schoolsKenny Malone calls it a game of chicken: the pressure on universities works only through students who may leave school or face a shrunken private loan market.
Executive Summary AI
  • Starting July 1st, the Department of Education caps borrowing for most graduate programs at about $21,000 a year, with a higher cap for medicine and law, ending the unlimited Grad Plus lending that began in 2006.1:44
  • The administration's logic, which economists call the Bennett hypothesis after William Bennett's 1987 New York Times op-ed "Our Greedy Colleges," is that abundant federal aid lets colleges raise prices, so capping loans should force them to cut tuition.1:59
  • Jeff Denning of the University of Texas at Austin found in the Texas study Republicans most often cite that for every additional dollar students could borrow, graduate schools raised prices by 64 cents, a causal relationship.14:19
  • Robert Kelchin of the University of Tennessee, Knoxville, studying business, medical and law schools nationally, found no evidence of the Bennett hypothesis outside for-profit colleges, noting a medical degree can take a million dollars of resources to produce.15:39
  • Preston Cooper of the American Enterprise Institute expects the caps to touch only about 30 percent of grad borrowers, concentrated at expensive schools like NYU and USC, while Dominique Baker warns the most robust evidence says capped aid mainly makes students stop enrolling.18:46
Key Quote
“We want to bring down the cost of education.”
— Linda McMahon0:33
Key Quote
“We've put in caps on programs for graduate students and undergraduate students”
— Linda McMahon0:44
Key Quote
“He called it Our Greedy Colleges.”
— Corey Turner8:43