Congress Proposes Capping Graduate Loans, Again. Let’s Take a Closer Look at How this Could Negatively Impact Graduate and Professional Education

In January 2024, the House introduced H.R. 6951, the College Cost Reduction Act. This bill serves as an attempt to update the Higher Education Act of 1965, suggesting comprehensive reform to the federal student aid system and higher education more broadly by standardizing the format and content of financial aid offer letters, removing origination fees and interest capitalization, capping the aggregate student loan limit for undergraduate and graduate students, and eliminating the Grad PLUS loan program.

To be sure, graduate loans are not a new federal policy concern. As graduate and professional student borrowing has more than doubled over the last 25 years, Congress has brought forth numerous proposals to modify the programs, including the PROSPER Act in 2017 and the REAL Reforms Act in 2022. Research from right-leaning and bipartisan think tanks as well as industry trade groups has supported the notion that federal intervention is necessary to stop what some consider a national student loan debt crisis.

Is this really the best solution for students, professions requiring graduate degrees, and everyday Americans these professionals serve?

Proponents of capping and eliminating federal graduate loan programs claim that the availability of federal student loans inevitably causes tuition hikes — an idea known as the “Bennett hypothesis.” Bennett contends that limiting federal graduate loans would enable the private market to serve borrowers instead, which would compel colleges and universities to lower their cost of attendance (COA). This would in theory reduce our national student loan debt — currently sitting at $1.6 trillion according to the Office of Federal Student Aid.¹

Yet, this hypothesis is readily disproven by data.

Research has found little evidence to support the claim that broader availability of federal student loans leads to increases in COA. This finding suggests other factors are contributing to the rising COA, such as greater operating expenses, investment in infrastructure, and the complexity of the financial aid system. Therefore, even if Congress caps or eliminates graduate loan programs, institutions will continue to increase their COA, and many students will not be able to afford graduate and professional education.

If a policy such as this were to be enacted, for whom would graduate and professional education become unaffordable and, consequently, inaccessible? Using data from the 2020 National Postsecondary Student Aid Study, the tables below indicate the percentage of graduate and professional students who borrowed from a federal loan source, non-federal, both, or never borrowed throughout the duration of their education by race and ethnicity.² Of students who pursued graduate or professional education, 45.6% borrowed from a federal loan source. Notably, compared to White students, 10% more Hispanic students and 21% more Black students borrowed federal loans.

This data suggests that capping and eliminating graduate loans would create a barrier across all demographics in terms of graduate and professional education access, exacerbating existing racial and ethnic disparities.

Note: The data presented reflects only U.S. citizens and permanent residents. The data also reflects only students pursuing master’s and doctoral degrees, including research, professional, and other remaining types.

Of course, the implications of capping and eliminating graduate loans would extend beyond access. Such a policy would also threaten the diversity of our nation's most advanced professions, like medicine and law, which already struggle to recruit and retain racial and ethnic minorities.

In its recent Profile of the Legal Profession, the American Bar Association stated in 2023 that Black lawyers constituted five percent of the profession, Hispanic lawyers six percent, and White lawyers 79%.³ Yet, of those Americans who used civil legal aid services in 2022, 57.8% identified as part of a racial or ethnic minority group.⁴ Therefore, the current demographic of the profession is not representative of those who rely on public legal services. This data reinforces concerns that creating additional barriers for racial and ethnic minorities pursuing graduate and professional education, such as capping and eliminating graduate loans, will have lasting consequences for professions of the public good.

To learn more about graduate loans and the implications for students if the programs are capped or eliminated, refer to our resources and reports:

• Graduate Loan Capping: Advocating for the Betterment of Higher Education – This video reviews how capping graduate loans would impact students negatively and how AccessLex Institute is advocating to improve access to advanced degrees.
• Examining Grad PLUS: Value and Cost – This research report uses federal data to show that the primary criticisms of the Grad PLUS program, such as rising institutional education costs and potential costs to the federal government, are either nonexistent or massively overblown.
• Examining Graduate Lending: Access vs. Private Lending – This research report uses federal data to show that private student loan lending is an inadequate substitute for investment from the federal government in graduate and professional education and could have a disparate impact on Black students and Historically Black Colleges and Universities (HBCUs).
• The Dangers of Limiting Graduate Loans on HBCUs – This infographic explores the role of HBCUs in providing access to Black graduate and professional students and the implications of capping or eliminating graduate loans for these institutions.

Notes:

¹ Federal Student Aid. (2024). Portfolio by loan type [Data set]. https://view.officeapps.live.com/op/view.aspx?src=https%3A%2F%2Fstudentaid.gov%2Fsites%2Fdefault%2Ffiles%2Ffsawg%2Fdatacenter%2Flibrary%2FPortfoliobyLoanType.xls&wdOrigin=BROWSELINK

² National Center for Education Statistics. (2020). National postsecondary student aid study, graduate (NPSAS:GR). https://nces.ed.gov/datalab

³ American Bar Association. (2023). Profile of the legal profession. https://www.abajournal.com/files/POLP.pdf

⁴ Legal Services Corporation. (2022). By the numbers: The data underlying legal aid programs. https://lsc-live.box.com/s/h2bajpr3gps4s4a1iio6fwiddhmu1nwb