For the past two decades, graduate students have been able to take out an unlimited amount of federal student loans to cover the full cost of their education.If they needed $60,000 a year, they could borrow $60,000 a year, year after year.The Trump administration has a plan to change that by capping graduate school loans for many students at $20,500 a year, and $100,000 overall — effective July 1.(A federal court temporarily blocked a small piece of that plan, but the U.S.
Education Department confirmed to NPR that loan limits will indeed begin July 1.)In a year packed with changes to higher education policy, this new loan limit is one of the biggest, and one of the most controversial.U.S.Secretary of Education Linda McMahon says the endgame is to force colleges to slash their tuition prices."College costs are just exorbitant.
Students are burdened with debt…" McMahon told the House education committee in May."We really have to do something to bring down the cost of college."With that goal in mind, Republicans used last year's One Big Beautiful Bill Act to scuttle the program known as Grad PLUS and limit graduate loans.
The thinking goes: Borrowers will choose cheaper programs, and expensive schools will have to cut prices to compete.But many economists aren't so sure it will do what Republicans say it will.The idea that there's a connection between federal student loans and what colleges charge dates back almost four decades, to Feb.18, 1987.That's the day then-Education Secretary William Bennett, under President Ronald Reagan, penned a scathing opinion piece for The New York Times, titled "Our Greedy Colleges."In it, Bennett excoriated schools for tuition increases that outpaced inflation, and he argued that increases in federal student aid "have enabled colleges and universities blithely to raise their tuitions, confident that Federal loan subsidies would help cushion the increase."His idea took hold, and economists have dubbed it "The Bennett Hypothesis....