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US universities risk losing out on billions of dollars in tuition fees, as the Trump administration’s plan to cap federal student loans for graduate degrees threatens to reduce enrolment.
Up to $10bn in existing aid would exceed borrowing limits set to come into force in July, with more than 160,000 students expected to struggle to find alternative sources of finance, according to analysis from researchers at American University and the Federal Reserve Bank of Philadelphia.
“The risk of the ‘hit’ to institutions is greater than that, because if borrowers can’t find alternative financing they’ll lose the students’ entire tuition — not just the loan volume over the cap,” said Jordan Matsudaira at American University’s Postsecondary Education and Economics Research centre.
Universities have already been dealt severe blows as the Trump administration has cut grants, launched legal attacks on institutions and sought to restrict international student visas. The moves have contributed to a 17 per cent decline in new foreign students, according to a survey of 825 schools.
As part of President Donald Trump’s “One Big Beautiful Bill” act, graduate students’ federal loans will be limited to $50,000 a year for programmes considered “professional”, including law and medicine, and $20,500 for other graduate programmes, such as nursing and business.
The Trump administration has portrayed the new borrowing caps, due to come into force in July, as a way to reduce the overall amount of federal student loans, which has soared to $1.65tn from $260bn in 2004, according to the New York Fed.
“These loan limits will help drive down the cost of graduate programmes and reduce the debt students have to take out,” the Department of Education said in a statement.
But education experts fear that the limits will cause fewer people to pursue graduate studies, as many of them — especially lower-income students — will struggle to afford more expensive private top-up loans.
Private loans tend to have higher interest rates and require credit records or parental support that those on lower incomes may be unable to secure.
“A lot of higher ed experts — and I agree — think imposing some type of limits on graduate borrowing is a good idea,” Matsudaira said. “But I believe the limits are too blunt, and a better policy would be to have the limits vary based on the typical earnings in the fields students are training for.”
There is particular concern from institutions offering degrees no longer considered “professional” under the new rules, including business and nursing.
Schools that offer these types of programmes have lobbied to reclassify them as professional degrees in order for their students to be eligible for higher federal funding limits.
“Business degrees have long been widely recognised as professional degrees, contributing to a strong, sustainable and vibrant economy . . . Proposed changes to the graduate student loan landscape risk limiting access for thousands of students and disrupting this positive trend,” said Lily Bi, president of the Association to Advance Collegiate Schools of Business.
Others have pointed out that the lower loan limits for certain degrees could lead to a shortage of workers in those fields.
“If not corrected, this policy would create a barrier for many nurses seeking to advance their education, reduce access to patient care and impact the stability of the nursing workforce,” the American Association of Colleges of Nursing said.
The education department has accused critics of “fear mongering” and stressed that most nursing students earned their degrees as undergraduates, who are not subject to the new caps. The majority of nurses seeking graduate degrees in nursing borrowed below the new threshold amount, the department said.
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