For decades, US colleges and universities have increased their tuitions well over the cost of inflation knowing that Department of Education (DOE) loans – funded by the American taxpayer – would foot the bill. No more: the US DOE announced last week that it has finalized rules to end this practice.
The new rule will take effect July 1 and includes caps for graduate students of $20,000 per year and a lifetime cap of $100,000. The Grad PLUS program, which allowed graduate and professional students to borrow up to the full cost of a degree, is being eliminated. Student loan balances in excess of $250,000 were not unusual with this program.
Parent PLUS loans, which currently allow parents to borrow up to the full cost of attendance for their child, are now being capped to $20,000 per year, and an aggregate cap of $65,000 per dependent. The new rules also streamline loan repayment options.
The current DOE student loan portfolio is $1.7 trillion. It is estimated that fewer than 40 percent of borrowers are in repayment while nearly 25 percent are in default. According to the DOE, 71 percent of college graduates delay major life milestones like buying a home because of student loan debt.
“American families live within their means, and it’s time for colleges and universities to do the same. … This final rule will help ensure students can access higher education without racking up excessive loan debt, offer repayment options that better serve borrowers, and force institutions to reduce costs.”