Are Loan Limits Driving Down College Costs?

When Republicans set new loan limits for graduate students last summer, they made it clear their intent was to drive down college costs and address the mounting student debt crisis. Now, as those limits take effect ahead of a new academic year, some are saying that goal is already coming to fruition.

A new blog from the American Enterprise Institute, a right-leaning think tank, says that graduate programs are “cutting tuition,” citing 10 programs across the country—seven of which are providing scholarships rather than directly reducing tuition. In many cases, the colleges making these changes pointed to the Republican loan limits, added Preston Cooper, a senior fellow at AEI and author of the blog.

For example, Emory University announced in November that it would offer a $25,000 tuition scholarship to any student who applied for its online Doctor of Public Health, accelerated Master of Public Health, or hybrid Master of Health Administration programs by January.

“In light of recent changes to graduate student loan programs, these funds will help students invest in their education while minimizing the burden of significant debt,” said Kara Robinson, Emory’s senior associate dean of enrollment management and student affairs, in the announcement.

But not all colleges AEI cited explicitly tied the decision to the new loan limits. Still, “if you kind of read between the lines a little bit, that is probably something that is on their minds,” Cooper said.

The Education Department has shared similar examples, and, in most cases, the financial adjustment applies to specific degree programs, rather than to an entire college or university. Some of the changes are based on income level or only apply to in-state students or those registered as graduate assistants.

Still, Cooper argues “this is early signs that the loan limits seem to be working.”

House Republicans on the education committee are also touting AEI’s blog, saying in a news release that it “demonstrates schools are already responding by lowering prices—a positive sign that [the education provisions of the One Big Beautiful Bill] are beginning to restore sanity in college pricing resulting in better value for students and taxpayers.”

But not everyone is on the same page. Some more left-leaning policy experts say the examples Cooper lists are just a fraction of graduate programs overall, so it’s too soon to tell whether the loan limits are working, especially as litigation challenging the new rule continues and many institutions wait to see how the policy plays out. Critics also note that the majority of the listed examples don’t directly lower a program’s sticker price; instead, they guarantee scholarships to cover the difference between the new federal loan limits and existing tuition rates.

“Even if the programs that have been identified as lowering their prices for some set of their students were [actually lowering cost for] entire institutions, it would still be a fraction of the colleges in the country. So it’s way too early to argue that costs have gone down, and it’s pretty bold to assume that they will,” said Clare McCann, managing director of the Postsecondary Education and Economics Research (PEER) Center at American University. “There will be changes to how colleges price, but it is not remotely clear at this point that that will be universally or even widely in the interests of many borrowers.”

A December study from PEER and the Federal Reserve Bank of Philadelphia’s Consumer Finance Institute shows that about 28 percent of graduate borrowers take out loans above the new federal limits; on average, they’d need to find about $21,700 to fill the gap. And, of those borrowers, nearly four in 10 (38 percent) have either poor credit scores or have no credit score at all, which could make it difficult, or even impossible, to obtain private loans.

Still, if the net cost drops for certain students in certain programs, McCann argues it doesn’t indicate that college costs are collectively heading down. Providing discounts for some students, rather than changing the sticker price, allows colleges to help new students adapt to the loan limits while continuing to charge existing students full price, McCann noted. It’s also far easier to retract a scholarship than raise prices should loan limit regulations change, she said.

But McCann also isn’t opposed to the scholarships for now. She doesn’t think the current loan limits are the best way to lower college cost and hopes to eventually see more nuanced loan policies based on how students fare in the programs.

“One important component of thinking about college costs is understanding whether the school is investing enough in the instruction of the program to provide a sufficient quality education. So you wouldn’t want to simply drive down costs without thinking about the trade-offs that are being made,” she explained. By creating scholarships, colleges are “trying to lower the price at least some students will pay [without risking loss of quality], but it’s not necessarily indicative that the cost itself has changed.”

Ben Cecil, deputy director of higher education policy at Third Way, a left-of-center think tank that often advocates for students, fell somewhere in between Cooper and McCann. In his view, scholarships change the net cost and allow students to pay less—so to some degree that is an example of costs coming down. But on the institutional side, does that mean tuition is really being lowered? Or are they just moving money around?

“The answer is far more complicated there,” Cecil said.

Providing scholarships also helps accomplish one of Cecil’s primary goals beyond just lowering college cost: ensuring a more equal distribution of investment risk. As you lower college costs, Cecil said, it’s also important to ask how institutions, and sometimes private lenders, can take on more responsibility. That way, it’s not just students and taxpayers carrying all of the burden, if the investment doesn’t pay off.

“What you’re seeing in [Cooper’s blog], is a lot of schools coming to the table to try to help answer that question proactively,” he explained.

Cooper acknowledged some institutions are waiting before they “pull the trigger.” But he believes the evidence suggests that universities are lowering tuition and the list of colleges doing so should only expand.

“I’m really glad that a lot of these schools are cutting tuition,” he said. “It’s going to make a real difference in the lives of students who have to spend less of their own money and take on less debt to pursue a graduate degree at one of these institutions.”