Big changes could be coming for student loan borrowers

Summary

Marketplace Morning Report: Big Changes Could Be Coming for Student Loan Borrowers

Episode Details

• Title: Big Changes Could Be Coming for Student Loan Borrowers
• Host: David Brancaccio
• Release Date: June 24, 2025
• Description: In this episode, David Brancaccio delves into the proposed tax and spending legislation in the Senate that aims to cut costs by limiting access to student loans. The discussion explores the potential ramifications for borrowers, the education system, and the broader economy, featuring insights from experts in the field.

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Introduction to the Proposed Legislation

The episode opens with David Brancaccio highlighting the Senate's latest tax and spending proposal, which seeks to reduce federal expenditures by restricting access to student loans. This legislative move is primarily driven by Senate Republicans, who estimate that these changes could save the Treasury approximately $300 billion.

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Reduction of Repayment Options

One of the cornerstone provisions of the bill involves curtailing the variety of repayment options available to student loan borrowers. Currently, federal student loans offer flexible repayment plans, including income-driven options that adjust monthly payments based on the borrower's earnings.

Tom Kloza emphasizes the gravity of these changes at [06:27]:

“I don't think it can be overstated how significant these changes would be and how impactful they will be for borrowers.”

Adam Minsky, a lawyer specializing in student loans, further explains the proposed caps:

“Adam Minsky says the bill would cap the amount of money parents of undergraduate students could borrow from the federal government. Currently, they can take out as much as they need to help their kids pay for college. The House bill would limit that to $50,000 total. The Senate version would cap it at $65,000 per kid, which may sound like a lot, but it's often not enough to cover, you know, four years of an undergraduate college education, especially for low-income students and their families.” ([06:35] - [06:55])

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Limits on Borrowing Amounts

The legislation also imposes strict limits on how much students and their families can borrow for higher education costs.

• Undergraduate Loans:

  • House Bill: Caps at $50,000 per student.
  • Senate Bill: Increases the cap to $65,000 per student, which still falls short of covering the average four-year tuition, particularly for students from lower-income backgrounds.

• Graduate Loans:

  • Limits range between $100,000 and $200,000, depending on the program. This cap poses challenges for students pursuing expensive degrees in fields like law, medicine, or business, where total educational costs can easily exceed these limits.

Adam Minsky highlights the disparity between the caps and actual costs:

“It's easy to rack up several hundred thousand dollars in loans.” ([07:02] - [07:09])

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Impact on Students and Families

The proposed changes are set to have profound effects on students and their families:

• Increased Financial Pressure: With higher monthly payments due to reduced repayment options, borrowers may face greater financial strain.

• Shift to Private Loans: Persis Yu, managing counsel at the Student Borrower Protection Center, warns that many students will turn to private loans, which lack the favorable terms of federal loans, such as income-based repayment and loan forgiveness options.

“Unlike federal loans, private student loans do not offer any income based repayment options or paths to loan forgiveness.” ([08:02] - [08:09])

• Credit Barriers: Private loans come with stringent credit checks, potentially excluding lower-income students who may already be struggling to afford education.

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Expert Opinions and Predictions

Several experts weigh in on the potential consequences of the legislation:

• Tom Kloza projects a decline in college enrollment:

  “I think that we're going to see drops in enrollment. I think fewer people will pursue getting a degree, and I think that we're going to start seeing shortages in certain occupations.” ([08:09] - [08:19])

• Beth Akers from the American Enterprise Institute echoes these concerns:

  “These new limits on borrowing will likely mean fewer people get certain degrees and go into some public service jobs.” ([08:27] - [08:36])

• Adam Minsky underscores the long-term risks:

  “It's a big financial risk obviously, to take on that level of debt, but a lot of people can do it, given the availability of federal programs such as income Driven Repayment Programs and Public Service Loan Forgiveness.” ([07:50] - [08:02])

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Broader Implications for Education and the Workforce

The proposed legislation is expected to ripple through the education system and the labor market:

• Educational Attainment: Higher education institutions may see a drop in enrollment, particularly among students from disadvantaged backgrounds who rely heavily on federal aid.

• Workforce Shortages: Essential sectors such as healthcare, law enforcement, and social work may experience staffing shortages as fewer individuals pursue these costly yet critical professions.

Persis Yu criticizes the bill for not addressing the root cause of educational affordability:

“There's no question that the student loan system is broken. But these proposals are not actually addressing the cost of education. Instead, she's limiting students' access to it.” ([08:48] - [09:11])

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Conclusion and Final Thoughts

The episode concludes with a reflection on the potential long-term effects of the Senate's proposed legislation. While aimed at reducing federal spending, the cuts to student loan accessibility may inadvertently stifle educational opportunities and lead to significant workforce gaps in vital public service roles. Experts unanimously agree that while addressing the student loan crisis is crucial, the proposed measures may not be the most effective solution, highlighting the need for comprehensive reforms that tackle the affordability of higher education directly.

David Brancaccio wraps up the segment, emphasizing the importance of these developments:

“I think you're breaking into this wall. Regardless. I was hoping you wouldn't say that.” ([09:30])

Tom Kloza adds a touch of humor to conclude:

“I need to go and get some whiskey.” ([09:34])

---

This episode of Marketplace Morning Report provides a thorough analysis of the Senate's student loan legislation, shedding light on its potential impacts and sparking a crucial conversation about the future of higher education financing in the United States.

Transcript

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[David Brancaccio]

Along, almost disassociated with the sharp turns overnight in the Israel, Iran war David I'm David Brancaccio in Los Angeles. As you've been hearing, both Israel and Iran are accusing each other of violating an apparent cease fire announced late yesterday by President Trump. Trump is expressing something between anger and exasperation this morning. Players in financial markets are adopting the view that it is a less risky situation. Today, crude oil is down 4.7%, 6529 a barrel. In New York, the stock market is open and higher. The Dow's up 361points, 9. 10. The S&P also up 9. 10%. The Nasdaq in early trading up 1.2%. Traders seem convinced that Iran will not close the vital export waterway between Iran and Oman, the Strait of Hormuz. Marketplace's Elizabeth Troval has more.

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Longtime energy analyst Tom Kloza with Turner, Mason & Co. Has watched oil prices rise and fall during conflict before this round. He has a nickname for the Strait.

[Tom Kloza]

Of Hormuz, the straight up hyperbole, because people will invoke it as a reason why crude should go to $100. I think that without all of this nonsense in the Persian Gulf, we're looking at $50 more likely down the road.

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And Robo Bank's Joe DeLaura says even if we see more escalation in price spikes in the short term, the oil will eventually flow and will revert back to an oversupplied global oil market. That's partially because demand for gasoline is decreasing in China and flattening in the.

[Tom Kloza]

US and there's quite a bit of production that basically is coming online in.

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[Tom Kloza]

On top of that, OPEC is bringing more supply into the market, which is.

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Why he says prices are likely to crater if this conflict eases. I'm Elizabeth Troval for Marketplace.

[David Brancaccio]

US bonds are down with the 10 year interest rate up to 4.37%. Federal Reserve Chair Jerome Powell is set to begin two days of testimony to Congress in just a bit, where indications are he's sticking to the idea of keeping interest rates steady. That's the posture he had last week. Marketplace's Nancy Marshall Genzer has that.

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Fed Governor Christopher Waller told CNBC last week that the Fed could cut rates at its next meeting in July to keep unemployment from spiking. Yesterday, Fed Vice Chair for Supervision Michele Bowman said if inflation cools or there are signs of a weakening labor market, the Fed should consider lowering borrowing costs possibly next month. Chair Powell, in his opening statement released ahead of the hearing, he's cautious. Powell says the Fed is well positioned to wait to learn more about the likely course of the economy before changing interest rates. He says tariff hikes this year are likely to push up prices and the Fed will base rate decisions on incoming data data. I'm Nancy Marshall Genser for Marketplace.

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[David Brancaccio]

The big tax and spending legislation currently in the Senate proposes saving money by cutting access to student loans. Among the provisions reducing the number of repayment options. While this would make monthly payments higher for borrowers, Senate Republicans estimate it would save the Treasury $300 billion. Also proposed limits on how much students and families could borrow. Marketplace's Samantha Fields has that Today, if.

[Adam Minsky]

You or your kids get into college or grad school and you don't have the money to pay for it, which most people don't, you can borrow however much you need from the federal government to cover tuition and living expenses. But if the legislation currently working its way through Congress passes, that won't be the case anymore.

[Tom Kloza]

I don't think it can be overstated how significant these changes would be and how impactful they will be for borrowers.

[Adam Minsky]

Adam Minsky, a lawyer who specializes in student loans, says the bill would cap the amount of money parents of undergraduate students could borrow from the federal government. Currently, they can take out as much as they need to help their kids pay for college. The House bill would limit that to $50,000 total. The Senate version would cap it at 65,000 per kid, which may sound like.

[Tom Kloza]

A lot, but it's often not enough to cover, you know, four years of an undergraduate college education, especially for low.

[Adam Minsky]

Income students and their families. Persis Yu, managing counsel at the Student Borrower Protection center, says it's likely many won't be able to get enough federal financial aid to pay for school. These students are going to be forced to turn to the private student loan market, and those loans tend to be much more expensive, and that's if they can even get private loans. They also come with pretty onerous credit background checks, which means that some people just won't qualify. The bill would also put limits on how much students can borrow for graduate school. Between 100 and $200,000 total, depending on the program, which again, may sound like a lot, but isn't enough to cover the cost of certain degrees if you go to law, medical or business school. Adam Minsky says it's easy to rack up several hundred thousand dollars in loans.

[Tom Kloza]

It's a big financial risk obviously, to take on that level of debt, but a lot of people can do it, given the availability of federal programs such as income Driven Repayment Programs and Public Service Loan Forgiveness.

[Adam Minsky]

Unlike federal loans, private student loans do not offer any income based repayment options or paths to loan forgiveness.

[Tom Kloza]

I think that we're going to see drops in enrollment. I think fewer people will pursue getting a degree, and I think that we're going to start seeing shortages in certain occupations.

[Adam Minsky]

He expects eventually many people will be unwilling or unable to become primary care doctors, public defenders or social workers. Beth Akers at the American Enterprise Institute agrees. These new limits on borrowing will likely mean fewer people get certain degrees and go into some public service jobs.

[Sponsor Announcer]

On the other hand, it also protects them from taking on debts that we know, empirically speaking, are going to be unaffordable. I don't think making unlimited debt available is the right solution.

[Adam Minsky]

There's no question higher education has become increasingly unaffordable, says Persis Yu at the Student Borrower Protection Center. And there is no question that the student loan system is broken. But these proposals are not actually addressing the cost of education. Instead, she says, they're limiting students access to it. I'm Samantha Fields for Marketplace, and in.

[David Brancaccio]

Los Angeles, I'm David Brancaccio. This is the Marketplace Movement morning report from 8pm American Public Media.

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[David Brancaccio]

I think you're breaking into this wall. Regardless. I was hoping you wouldn't say that.

[Tom Kloza]

I need to go and get some whiskey.

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I think I would get the whiskey for sure. Subscribe to this Old House Radio hour from La Est Studios. Wherever you get your podcasts.