Tag: loan

  • Why the current campaign on student loan interest may be misguided, misunderstood and misdirected

    Why the current campaign on student loan interest may be misguided, misunderstood and misdirected

    Author:
    Nick Hillman

    Published:

    HEPI Director Nick Hillman takes a look at the campaign to write off some outstanding student debt.

    There has been a spate of media stories this week about student loans. In essence, people who went to university in the years after higher tuition fees began in 2012 are now getting on in their careers only to find a big chunk of their salary disappearing at source.

    Their anger has focused especially on the real interest rate applied to the debts of higher earners (currently 3.2% to cover [RPI] inflation plus another 3% on top). This interest rate means you can be making material student loan repayments while not materially reducing the face value of your outstanding student loan.

    Such anger was always going to happen. In 2014, I wrote a piece for the Guardian entitled ‘Today’s students aren’t an electoral force, but wait until debts bite’. This predicted ‘the debts today’s students are accruing’ would eventually ‘cause a political ruckus’:

    come with me to the election of 2030. Those who began university when fees went up to £9,000 in 2012 will be in their mid-thirties by then. That is the average age of a first-time homebuyer and the typical age for female graduates to have their first child. By then, there will be millions of voters who owe large sums to the Student Loans Company but who need money for nappies and toys, not to mention childcare and mortgages. So, however reasonable student loans look on paper now, the graduates of tomorrow could end up a powerful electoral force.

    It is easy now, as it was easy then, to see how promising to reduce these graduates’ student debts would be popular, at least with them. At the 2005 New Zealand general election, Labour promised to abolish student loan interest in ‘a blatant, unapologetic pitch for the middle class vote – and it probably worked’. A later New Zealand Prime Minister remarked: ‘it’s not politically sustainable to put interest back on student loans. It may not be great economics, but it’s great politics.’ 

    Of course no one likes facing having high debts or seeing big deductions from their salaries to repay those debts. Plus, it is a very hard time to be a young graduate, with high housing costs, a tough graduate labour market and endless obstacles against settling down. (Is it possible, perhaps, that the current campaign has found such a sympathetic hearing among older voters and older journalists because it feels easier to support reducing younger graduates’ student debts than to support other changes that could help younger workers more, such as lots of new housebuilding?)

    But as the arguments rage, let’s not pretend the new campaign is anything other than what it is: an attack on the most progressive feature of England’s (old) student loan system by those whose degrees have helped them on to higher-than-average wages.

    As Lord Willetts told a parliamentary committee in 2017:

    the interest rates were [originally] brought in to make the system a bit more progressive – [to] collect rather more from high‑paid graduates – but I am afraid that the lesson, surely, from interest rates is that progressive policies are not always politically popular.

    The current complaints from young professionals are also an outstandingly clear example of the old idea that entering work and settling down pushes people from left to right politically. Remember, the real interest rate on student loans is the single most progressive feature of the student loan system: it is the bit that ensures better-off graduates do not extinguish their loan swiftly and instead go on paying back for longer. Getting rid of it would therefore be regressive.

    I can’t help feeling that today’s angry middle-income graduates resemble no one so much as those who voted for Margaret Thatcher’s tax cuts in the 1980s. (Indeed, if I were Kemi Badenoch, I would be asking whether this group might offer a path back to power for the centre right.) 

    So much is being missed in the current campaign that I feel duty bound to flag the 10 points below:

    1. The original proposal in the Browne report of 2010 to charge a real interest rate was to ensure that graduates covered the government’s cost of borrowing – at that time, this was thought to be 2.2 per cent (but it is higher today), though the Coalition Government went for a slightly higher 3 per cent maximum to make the system as progressive as possible. Today, the UK Government owes nearly £3 trillion and annual interest on that debt is around £100 billion. It would feel great if we did not have to pay that interest each year, but we do. 
    2. The real interest rate no longer exists for new students in England (as it was abolished in 2023). Much of the media coverage in the last few days has seemed irresponsible because it implies to people currently holding offers from universities that higher education is not worth it. This morning, for example, BBC Radio 4’s flagship Today programme (1’53” on) featured a cosy interview of two graduates, one an MP, that talked about the costs of repaying a student loan but which ignored the enormous (on average) personal financial and non-financial benefits of getting a degree – which remain substantial even after taking the loan repayments into account.
    3. One of the graduates interviewed on the Today programme called his 51% marginal deduction rate (40% income tax, 2% National Insurance and 9% student loan repayments) ‘highly disincentivising’. Taking home less than half your pay is indeed painful (just as is losing more than half your benefits for every extra £1 earned). By inclination, I rather favour a smaller state myself. But the graduate said, as a consequence of this 51% rate, that he is ‘trying to reduce my hours’. This seems an unusual response, given it’s surely better to receive 49p in each extra £1 earned than not to earn that £1 at all and given that reducing his hours will mean his student loan debt ends up growing even faster as his repayments fall. Many of the older journalists encouraging unhappy graduates to make these arguments will be facing a marginal tax rate of around (sometimes above) 50% themselves, yet it does not seem to have made them less ambitious. (Paging Arthur Laffer.)
    4. It is the interest rate that, in part, pays for the insurance features of student loans, such as the write-offs for those whose higher education did not work out so well financially. If you never hold down well-paid work for whatever reason, you do not have to pay back your loan. The student loan system has a lot in common with taxation and that is how taxation works too: those with more pay for those with less. So it was particularly odd, I thought, to hear the Labour MP for Milton Keynes North, say on Radio 4 that other debts might be better than student loans ‘because of the high interest rates’. Save the Student (‘the student money site’) rightly responded by saying: ‘The suggestion from Chris Curtis that it may sometimes be better to take out a private loan was astonishing (not to mention unrealistic and dangerous).’ Could it have been better to focus on the continuing campaign to get Milton Keynes a regular university or on the delays in the opening of East/West rail, which is currently being held up by a petty dispute over who should open the train doors, thereby hindering the development of the Oxford-Cambridge Arc?
    5. The interest rate in question is tapered. I wish I had a pound for every time the interest rate on student loans is written about as if it is fixed. In fact, the cohort of graduates facing real interest rates do not face a real interest rate if they earn below £28,470 and they only face the full whack if they earn at least £51,245 a year – significantly higher than the average graduate salary let alone the average salary for the working population as whole. The interest rate these graduates face is also capped at certain times. In the sober official language: ‘during some periods we may apply an interest cap to ensure you’re not being charged a higher interest rate than comparable rates found in the commercial market.’
    6. A really detailed look at the whole issue of interest on student loans was made by the Augar panel at the end of the last decade. They concluded abolishing interest (which has of course now happened for those going to university from 2023) would be deeply unfair and damage other parts of education: ‘Some of our respondents argued that student loans should never attract real interest – not even for borrowers who have left education and begun earning. We do not accept this view: a level of real interest should continue to be charged on the grounds that it would be imprudent and wasteful for government to provide entirely costless finance. It is worth reiterating the point that the variable interest rate mechanism protects low earners from high real interest rates, while increasing the contribution from higher earners. The provision of loans at zero real interest throughout the whole loan period could encourage almost all students to take out loans (as opposed to paying fees with their own funds) and to continue to hold this ‘debt’ throughout the contribution period as it may eventually be written off. This would be at considerable additional cost to government at the expense of investment elsewhere in tertiary education.’
    7. The real interest rate was abolished by a centre-right government in England from 2023 but it was kept in Wales by a centre-left government, which likes its progressive nature. (Scotland does not have a real rate of interest, which is part of the general SNP approach of seeming progressive while in practice protecting middle-class finances at the price of restricting places and underfunding universities.) The new campaign seems to have emerged from a left-of-centre place (judging for example, by the MPs speaking out) but eradicating interest is not really a left-of-centre idea at all: it takes weight off the shoulders of the best performing graduates and applies it to others, whether they are less highly-performing graduates or non-graduates. That is why, since the real interest rate was abolished for new students in England from 2023, many organisations favouring greater redistribution and regarded as being on the left have called for the real interest rate to return. Last year, Times Higher Education reported that the National Union of Students wanted to reintroduce ‘real interest rates of up to 2 per cent for higher earners’.
    8. Perhaps the most important point of all, however, is that today’s campaigners should be careful what they wish for. A judicious campaign may get them what they want, as in New Zealand. But whenever in the past people here have said students loans are not being paid down quickly enough, the policymakers’ response has tended to be the opposite: in other words, toughening up the repayment rules, for example by reducing the salary threshold at which the loans start to be repaid, leaving people with less – not more – cash in their pockets. Another favoured policy has been to increase the student loan repayment term, to ensure more graduates pay back the entirety of their debts.
    9. If there is a case for writing off some or all of anyone’s outstanding student loans and if the country were rich enough to do this (I fear it is not, just look at the deficit / debt), then surely the cohort to start with would be the COVID generation, whose higher education was so badly disrupted. They are generally a different group to the early late 20somethings and early 30somethings now doing well in their careers who are behind the new campaign.
    10. Finally, it is worth recalling the story of the world’s first modern income-contingent student loan system, the Yale University’s Tuition Postponement Option (TPO) from the 1970s. The progressive features of this scheme became unpopular among Yale’s wealthy graduates who disliked paying to cover the costs of other graduates who had done less well financially. The TPO was eventually wound up in 2001 after an aeroplane salesman set up a ‘TPO Blues’ campaign for rich alumni. The scheme’s demise might have been popular, but no one should pretend it was progressive.

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  • Officials in Connecticut Propose New Graduate Student Loan

    Officials in Connecticut Propose New Graduate Student Loan

    The loan program would need $30 million for its first year, based on calculations of how much Connecticut students take out in Grad PLUS loans.

    Photo illustration by Justin Morrison/Inside Higher Ed | Getty Images | Rawpixel

    After President Donald Trump’s One Big Beautiful Bill Act (OBBBA) overhauled federal student loans, college affordability advocates worried that those changes would severely restrict who has access to higher education—especially graduate programs. Now, lawmakers in Connecticut are taking steps to ensure students in the state can continue to afford those degrees.

    Rep. Gregg Haddad, a Democrat who co-chairs the Connecticut legislature’s Higher Education Committee, announced a plan last week to create a new state-level student loan program to fill in the gap left by the elimination of Grad PLUS loans, a 20-year-old loan program that helped expand graduate education for middle- and low-income students. The program will be open to any student studying at a graduate program in the state.

    Josh Hurlock, deputy director of the Connecticut Higher Education Supplemental Loan Authority (CHESLA), a quasi-public body that administers Connecticut’s state-level student loans, said the organization is hoping to launch the new program in time for students to take out loans for the 2026–2027 academic year.

    “The Grad PLUS program historically has had very little credit check, so it’s been accessible to students of all credit qualities,” Hurlock said. “So, with the program going away … we want to make sure that students and schools have financing options available for their graduate students, and students and schools need to know what’s available sooner rather than later as we approach the fall semester.”

    The program would require $30 million in funding for its first year, based on calculations that students in Connecticut take out between $90 million and $100 million in Grad PLUS loans annually. (Those already receiving the loans will be grandfathered in.) Two-thirds of that would come from a bond that CHESLA will issue, while the remaining $10 million would have to come from state allocations. Haddad said he is hoping the funds can be drawn from a $500 million emergency reserve the state created in November specifically to offset federal cuts.

    Interest rates and borrower fees have not yet been determined, “but we think we can come up with an attractive product and solve this problem for Connecticut students,” Haddad said.

    Eliminating Grad PLUS loans is just one of the restrictions on federal student loans included in the OBBBA. The legislation also placed caps on how much borrowers can take out in federal loans for graduate programs and on Parent PLUS loans for dependent undergraduates. Proponents of the limits argued that uncapped federal loans encouraged universities to increase their tuition fees, creating the student debt crisis. But supporters of federal student loan programs argue they opened the door to graduate education and careers in fields like medicine for students who previously would not have had those opportunities.

    Grad PLUS loans will officially end and the caps for other federal loans will go into effect in July. Administrators at several institutions with a large number of graduate students told Inside Higher Ed that they’re still working to figure out how to close funding gaps for their students.

    Filling in the gap left behind by Grad PLUS loans is especially important because Connecticut, like most U.S. states, struggles with a shortage of workers in certain professions, like nurses and teachers, Haddad said.

    “We have a keen interest in making sure that we have a robust pipeline of people who want to enter those professions,” he said. “And we’d like to remove any roadblocks to having them achieve and complete their degrees so that they can get to work providing the services that people need in Connecticut.”

    Peter Granville, a fellow at the Century Foundation who researches college affordability, said that it’s wise for states to consider how they can support students in the absence of Grad PLUS funding.

    “State leaders know that their economies depend on these students being able to attain degrees in fields like education and nursing,” he said. “States will be worse off if [they] completely depend on private lenders filling gaps that they may or may not be inclined to fill.”

    Haddad said that the proposed loan program has been received extremely well by both the public and his fellow lawmakers, whom he is hopeful will support the proposal once their legislative session begins in February.

    “I was struck when we had our press conference the other day—the room was filled with nurses and social workers, physical therapists and educators from across the state,” he said. “I think it’s an indication that there’s a real problem we need to fix.”

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  • Connecticut Democrats pitch plan for state-level graduate loan program

    Connecticut Democrats pitch plan for state-level graduate loan program

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    Dive Brief:

    • Democratic leaders in Connecticut are proposing a new state graduate student loan program to fill a vacuum created by the federal lending pullback built into Republicans’ massive spending bill. 
    • That plan would expand the reach of the Connecticut Higher Education Supplemental Loan Authority, using up to $20 million of its funds to create the loan program, according to a press release. It also calls for $10 million in state funding. 
    • The program could reach over 2,000 students in its initial phase, a CHESLA official said at a press conference Wednesday. The chairs of the General Assembly’s education committee plan to introduce and push for the proposal in the upcoming session.

    Dive Insight:

    The federal bill set to take effect in July, dubbed the One Big Beautiful Bill Act, will bring sweeping changes to the federal student loan system, with the largest impacts landing on graduate students and programs. 

    The new law sunsets the Grad PLUS loan program, which allows graduate students to borrow up to the cost of attendance. When it launched 20 years ago, Grad PLUS was the largest new student aid program in decades. 

    Along with the program’s end, OBBBA sets new caps on annual and total borrowing. Federal loans will max out at $100,000 for graduate students and double that for professional students.

    Just who is considered a graduate or professional student is no small financial matter, and one that regulators are mulling. The U.S. Department of Education plans to propose regulations that would exclude some health professions — including nursing, occupational therapy and physician associates — from the definition of “professional” that carries a higher loan cap. 

    Much uncertainty hangs over the federal loan changes and could put pressure on states to engineer their own solutions, as Connecticut is considering. 

    “We can ensure that students have the ability to become a doctor or scientist or a nurse or an educator and have their career choice determined by their drive and their talent — not the size of their bank account,” Rep. Gregg Haddad, co-chair of the state House’s Higher Education and Employment Advancement Committee, said at a press conference Wednesday. 

    Haddad and others estimate Connecticut graduate students currently receive $90 million in Grad PLUS loans, leaving a large financing gap in the state once the program ends. 

    The plan to create a state-level loan program would use CHESLA’s existing infrastructure and bond authority, while state funding could make loans more affordable, said Josh Hurlock, deputy director of CHESLA, at the press conference. 

    “The plan is not to just replace the Grad PLUS program,” Hurlock said. “The goal is to provide a more affordable financing option for Connecticut graduate students.” 

    Democrats control both chambers of Connecticut’s legislature as well as the state’s executive branch. 

    Where states don’t create their own lending programs, graduate students could be forced into the private lending market to make up shortfalls in federal loans. 

    Currently, private lenders play a “minimal” role in the market, researchers with the Federal Reserve Bank of Philadelphia’s Consumer Finance Institute said in a recent analysis. 

    The study found that 28% of graduate student borrowers in recent years took out loans over the cap levels set by OBBBA. Of those, 38% had either subprime credit scores or no score at all, meaning they would struggle to borrow in the private sector without a co-signer. 

    Those students could also face higher interest rates and less generous terms from private lenders compared to loans from the federal government, the researchers pointed out. 

    Connecticut officials alluded to this possibility when announcing their proposal. 

    “These arbitrary ceilings do not reflect the reality of rising tuition, and they’ll force students to turn to a predatory private market for lenders that will impose higher interest rates with fewer protections,” Haddad said.

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  • How Demographics Could Elevate the Political Stakes of Student Loan Debt in 2028 and Beyond

    How Demographics Could Elevate the Political Stakes of Student Loan Debt in 2028 and Beyond

    Student loan debt has been a defining economic and political issue in the United States for over a decade. As of 2025, Americans owe nearly $1.8 trillion in student loans, with roughly 42–45 million borrowers carrying federal debt and average balances exceeding $39,000 per borrower. Delinquency rates have surged since repayment reporting resumed, with more than one in five borrowers behind on payments, and millions at risk of default. These financial pressures are now rippling through credit markets and household budgets, especially for younger, middle-aged, and lower-income borrowers. While student debt already garners public attention, shifting demographic trends and mounting economic pressures promise to reshape its political weight in the coming years unless comprehensive changes are enacted.

    The largest cohort of student borrowers today consists of Millennials and older members of Generation Z, many aged between 25 and 45. These are prime years for political engagement, as individuals are more likely to vote, form households, buy homes, and shape community priorities. In 2028, this group will be even more politically active, navigating careers, families, and fiscal pressures that student debt directly influences. As borrowers age into life stages where financial stability becomes paramount, their appetite for political solutions — including forgiveness, refinancing, and more manageable repayment structures — is likely to intensify.

    Student loan debt also affects communities differently. Black and Latinx borrowers are disproportionately burdened, with Black borrowers often owing more and struggling with repayment longer due to structural inequities in income and wealth. These disparities will continue to grow unless systemic reforms address not just debt levels but the economic systems that compound them over time. Communities of color are projected to constitute a larger share of the eligible electorate by 2030, and when a disproportionate share of voters in a given demographic faces an issue like unsustainable debt, it naturally becomes central to their political priorities and shapes the platforms of candidates seeking their support.

    Older Americans are impacted by student loan dynamics not necessarily as borrowers themselves, but as co-signers, parents, or caregivers helping children or grandchildren manage debt. With the U.S. population aging, the 65+ age group is expected to grow as a portion of the electorate, and those over 80 will increasingly drive Medicaid and healthcare costs, adding strain to federal and state budgets. Older voters tend to vote at higher rates than younger voters, and as more families find multigenerational debt obligations weighing on retirement savings, caregiving responsibilities, and healthcare needs, the political urgency around student loan reform may expand beyond traditional “student” demographics and into older voters’ policy concerns.

    Geographic and economic shifts also shape the political significance of student debt. States with high education costs, and correspondingly high average debt loads, may see student loan issues become central to local and statewide elections. Migration patterns bringing younger, more diverse populations to new regions — including parts of the South and Midwest — will likely influence electoral alignments and policy debates in competitive districts. Meanwhile, national concerns such as the growing federal debt, ongoing military engagements abroad, and rising costs associated with healthcare for an aging population amplify the stakes, creating competing pressures on policymakers who must balance debt relief against broader fiscal challenges.

    Economic inequality further complicates the picture. The concentration of wealth among the richest Americans continues to grow, giving this group greater political influence and shaping policy priorities in ways that often conflict with the needs of student borrowers and middle-class families. As wealth and power accumulate at the top, voters carrying student debt may increasingly perceive systemic unfairness, heightening the political salience of debt relief and broader structural reforms. The interaction of these factors — persistent debt, rising national obligations, ongoing conflict, and economic inequality — suggests that student loans will remain intertwined with larger national debates over fiscal responsibility, social safety nets, and the distribution of economic power.

    Student loan debt has already become a wedge issue in national politics, especially within Democratic primaries. The demographic shifts of the late 2020s, rising diversity, coupled economic pressures, and growing awareness of wealth inequality could make it a central concern for a broader slice of the electorate. Policymakers who ignore student debt risk alienating key voter blocs: younger voters whose turnout matters in swing states, communities of color with growing electoral influence, and middle-class families navigating financial strain alongside broader economic and geopolitical uncertainties.

    The economic impact of outstanding student loan debt, from delayed homeownership to depressed small business formation, carries demographic implications that feed back into the political sphere. If current trends continue, the cost of inaction will not just be political but economic, affecting national growth rates, tax revenue, social programs, and inequality metrics that in turn shape voter sentiment and policy priorities.

    Student Debt and the Shifting Political Landscape

    By 2028 and into the 2030s, demographic change is poised to elevate student loan debt from a pressing public concern to a core political battleground unless policymakers act proactively. With more borrowers entering key voting blocs, disproportionate impacts across racial and economic lines, and economic consequences rippling through communities of all ages, student loan debt is more than a financial issue: it is a demographic reality shaping the future of American politics.

    Sadly, the Higher Education Inquirer will not be around to cover these developments as they unfold. HEI has made predictions about student debt and its political consequences in the past, and while nothing is set in stone, the combination of rising demographics, persistent economic inequality, the mounting national debt, ongoing war-related obligations, and pressures from an aging population does not paint a promising picture. Without major policy reforms — such as targeted debt relief, changes to repayment systems, or broader higher education financing reforms — the political salience of student debt is likely to intensify, influencing campaigns, elections, and national discourse for years to come.

    Sources

    Education Data Initiative, “Student Loan Debt Statistics 2025,” educationdata.org
    TransUnion, “May 2025 Student Loan Update,” newsroom.transunion.com
    Forbes, “Student Loans for 64 Million Borrowers Are Heading Toward a Dangerous Cliff,” forbes.com
    College Board, “Trends in College Pricing and Student Aid 2025,” research.collegeboard.org
    LendingTree, “Student Loan Debt Statistics by State,” lendingtree.com
    NerdWallet, “Student Loan Debt Statistics 2025,” nerdwallet.com

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  • What Student Loan Borrowers in the SAVE Plan Should Know for 2026

    What Student Loan Borrowers in the SAVE Plan Should Know for 2026

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  • OPMs, Student Loan Servicers, Deregulation, Robocolleges, AI, and the Collapse of Accountability

    OPMs, Student Loan Servicers, Deregulation, Robocolleges, AI, and the Collapse of Accountability

    Across the United States, higher education is undergoing a dramatic and dangerous transformation. Corporate contractors, private equity firms, automated learning systems, and predatory loan servicers increasingly dictate how the system operates—while regulators remain absent and the media rarely reports the scale of the crisis. The result is a university system that serves investors and advertisers far more effectively than it serves students.

    This evolution reflects a broader pattern documented by Harriet A. Washington, Alondra Nelson, Elisabeth Rosenthal, and Rebecca Skloot: institutions extracting value from vulnerable populations under the guise of public service. Today, many universities—especially those driven by online expansion—operate as financial instruments more than educational institutions.

    The OPM Machine and Private Equity Consolidation

    Online Program Managers (OPMs) remain central to this shift. Companies like Academic Partnerships—now Risepoint—and the restructured remnants of Wiley’s OPM division continue expanding into public universities hungry for tuition revenue. Revenue-sharing deals, often hidden from the public, let these companies keep up to 60% of tuition in exchange for aggressive online recruitment and mass-production of courses.

    Much of this expansion is fueled by private equity, including Vistria Group, Apollo Global Management, and others that have poured billions into online contractors, publishing houses, test prep firms, and for-profit colleges. Their model prioritizes rapid enrollment growth, relentless marketing, and cost-cutting—regardless of educational quality.

    Hyper-Deregulation and the Dismantling of ED

    Under the Trump Administration, the federal government dismantled core student protections—Gainful Employment, Borrower Defense, incentive-compensation safeguards, and accreditation oversight. This “hyper-deregulation” created enormous loopholes that OPMs and for-profit companies exploited immediately.

    Today, the Department of Education itself is being dismantled, leaving oversight fragmented, understaffed, and in some cases non-functional. With the cat away, the mice will play: predatory companies are accelerating recruitment and acquisition strategies faster than regulators can respond.

    Servicers, Contractors, and Tech Platforms Feeding on Borrowers

    A constellation of companies profit from the student loan system regardless of borrower outcomes:

    • Maximus (AidVantage), which manages huge portfolios of federal student loans under opaque contracts.

    • Navient, a longtime servicer repeatedly accused of steering borrowers into costly options.

    • Sallie Mae, the original student loan giant, still profiting from private loans to risky borrowers.

    • Chegg, which transitioned from textbook rental to an AI-driven homework-and-test assistance platform, driving new forms of academic dependency.

    Each benefits from weak oversight and an increasingly automated, fragmented educational landscape.

    Robocolleges, Robostudents, Roboworkers: The AI Cascade

    AI has magnified the crisis. Universities, under financial pressure, increasingly rely on automated instruction, chatbot advising, and algorithmic grading—what can be called robocolleges. Students, overwhelmed and unsupported, turn to AI tools for essays, homework, and exams—creating robostudents whose learning is outsourced to software rather than internalized.

    Meanwhile, employers—especially those influenced by PE-backed workforce platforms—prioritize automation, making human workers interchangeable components in roboworker environments. This raises existential questions about whether higher education prepares people for stable futures or simply feeds them into unstable, algorithm-driven labor markets.

    FAFSA Meltdowns, Fraud, and Academic Cheating

    The collapse of the new FAFSA system, combined with widespread fraudulent applications, has destabilized enrollment nationwide. Colleges desperate for students have turned to risky recruitment pipelines that enable identity fraud, ghost students, and financial manipulation of aid systems.

    Academic cheating, now industrialized through generative AI and contract-cheating platforms, further erodes the integrity of degrees while institutions look away to protect revenue.

    Advertising and the Manufacture of “College Mania”

    For decades, advertising has propped up the myth that a college degree—any degree, from any institution—guarantees social mobility. Universities, OPMs, lenders, test-prep companies, and ed-tech platforms spend billions on marketing annually. This relentless messaging drives families to take on debt and enroll in programs regardless of cost or quality.

    College mania is not organic—it is manufactured. Advertising convinces the public to ignore warning signs that would be obvious in any other consumer market.

    A Media Coverage Vacuum

    Despite the scale of the crisis, mainstream media offers shockingly little coverage. Investigative journalism units have shrunk, education reporters are overstretched, and major outlets rely heavily on university advertising revenue. The result is a structural conflict of interest: the same companies responsible for predatory practices often fund the media organizations tasked with reporting on them.

    When scandals surface—FAFSA failures, servicer misconduct, OPM exploitation—they often disappear within a day’s news cycle. The public remains unaware of how deeply corporate interests now shape higher education.

    The Emerging Picture

    The U.S. higher education system is no longer simply under strain—it is undergoing a corporate and technological takeover. Private equity owns the pipelines. OPMs run the online infrastructure. Tech companies moderate academic integrity. Servicers profit whether borrowers succeed or fail. Advertisers manufacture demand. Regulators are missing. The media is silent.

    In contrast, many other countries maintain strong limits on privatization, enforce strict quality standards, and protect students as consumers. As Washington and Rosenthal argue, exploitation persists not because it is inevitable but because institutions allow—and profit from—it.

    Unless the U.S. restores meaningful oversight, reins in private equity, ends predatory revenue-sharing models, rebuilds the Department of Education, and demands transparency across all contractors, the system will continue to deteriorate. And students, especially those already marginalized, will pay the price.

    Sources (Selection)

    Harriet A. Washington – Medical Apartheid; Carte Blanche

    Rebecca Skloot – The Immortal Life of Henrietta Lacks

    Elisabeth Rosenthal – An American Sickness

    Alondra Nelson – Body and Soul

    Stephanie Hall & The Century Foundation – work on OPMs and revenue sharing

    Robert Shireman – analyses of for-profit colleges and PE ownership

    GAO (Government Accountability Office) reports on OPMs and student loan servicing

    ED OIG and FTC public reports on oversight failures (various years)

    National Student Legal Defense Network investigations

    Federal Student Aid servicer audits and public documentation

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  • AFT Pushes Back on Slow Loan Repayment Processing

    AFT Pushes Back on Slow Loan Repayment Processing

    AFT President Randi Weingarten has been a loud advocate for protecting borrowers’ rights to loan repayment programs.

    Chip Somodevilla/Getty Images

    The Department of Education has accumulated a backlog of more than 800,000 applications for income-driven loan repayments (IDR) as of Dec. 15, according to the most recent status report in a lawsuit filed by the American Federation of Teachers (AFT).

    The union originally sued the department in March for pausing all applications to IDR plans, loan consolidation and the Public Service Loan Forgiveness program, but the case was quickly settled as the department reopened the application portal and committed to providing regular status updates.

    For five months, the status reports carried on and the case remained quiet. But then, in September, AFT filed an amended class action complaint and motion for preliminary injunction, arguing that just because the portal is open doesn’t mean it is working properly. Tens of thousands of applications were going untouched, violating the rights of the borrowers who submitted them.

    In October, the department again reached a settlement with the plaintiffs, committing to process applications, and the motion was stayed. But now, with the latest status report released, AFT argues that the department isn’t holding up its end of the deal.

    “The problem is they don’t appear to have kept their word,” Randi Weingarten said in a news release Wednesday. “The borrower backlog remains eye-popping, and Education Secretary Linda McMahon clearly has no idea how to manage this process.”

    In addition to the backlog of pending loan repayment applications, the report shows that only 170 borrowers at the end of their IDR plan and 280 borrowers who have completed their PSLF payments have received their rightful loan forgiveness.

    Weingarten suggested that in addition to loan forgiveness being low on the Trump administration’s list of political priorities, much of the backlog is due to major staffing cuts.

    “Perhaps [Secretary McMahon] shouldn’t have sold the Department of Education off for parts,” the union president said. “President Donald Trump and Vice President JD Vance may believe affordability is a hoax, but hundreds of thousands of Americans just trying to get ahead are bleeding—and the administration’s lack of action is rubbing salt into the wound.”

    So, until the department “follows the law and processes every single outstanding application,” she added, AFT will not stop fighting its case.

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  • Loan and Degree Insurance May Be Self-Defeating (opinion)

    Loan and Degree Insurance May Be Self-Defeating (opinion)

    Imagine you are the parent of an incoming college student who wants to study theology, ranked among the lowest-paid majors after graduation. You’re proud of their conviction, but also anxious because friends and family keep reminding you that theology is a major for which career prospects are uncertain at best. Then, in the thick of college decision season, you learn that the college your child is considering offers something called “degree insurance”: If your graduate doesn’t earn above a set threshold, the program will step in to cover part of the gap.

    The promise is meant to ease parents’ and students’ fears. Yet, it raises a deeper question: Why would a college degree, still the surest path to economic advancement and long-term financial stability, suddenly require insurance at all?

    Across the country, colleges and universities are rolling out a new suite of financial products targeting undergraduates, marketed as “loan” and “degree” insurance. Loan repayment assistant programs (LRAPs), sometimes also called loan repayment guarantees, are a form of loan insurance that protect students against default: If a graduate doesn’t earn above a certain threshold, their student loan payments are reimbursed to a certain amount. Degree insurance is a mechanism akin to public “wage insurance” programs, where if a graduate makes less than the average income in their field adjusted for regional differences, the insurance would “top up” the difference in wages for a period of time.

    These two tools have distinct origins and underlying rationales. Loan Repayment Assistance Programs (LRAPs) originated in Yale Law School in the 1980s, and spread to other law schools, as the rising cost of legal education began to deter graduates from pursuing lower-paying public interest careers. While they began as internal sources of funding, the privatization of LRAP offerings and search for profit have pushed the industry to expand into new markets, namely undergraduate education. Indeed, Ardeo Education Solutions, an early and prominent player in this sector, was founded by Yale Law graduate Peter Samuelson, who himself benefited from Yale’s loan assistance program. Ardeo positions itself as reassuring families about the risks of taking on debt in order to pay for undergraduate education, “increasing access to the life-changing impact of higher education,” and freeing students from having to choose “between their passions and a paycheck.”

    Degree insurance products take a different approach. Degree Insurance, which counts Augustana College in Illinois as a client, draws on the cultural cachet of the American dream to market itself as an income equalizer; its flagship product, “American Dream Insurance,” guarantees “equal pay for equal study,” where “no graduate will have to earn less than their peers, regardless of race or gender, because everyone will have the same safety net.” This is insurance against the uncertainties and inequalities of the labor market as well as against individual weaknesses of any particular candidate.

    While the current scope and reach of this sector is challenging to assess, Ardeo Education advertises that it’s provided LRAPs to more than 30,000 students at more than 200 American colleges and universities. Participating institutions range from a number of small, faith-based colleges like Lyon College and MidAmerica Nazarene University to a public research university like Eastern Michigan University. Eligibility for repayment assistance usually requires graduation from the offering institution, full-time work (30+ hours/week), and staying below the income cap.

    The extension of LRAPs and degree insurance into undergraduate programs represents a new dimension of risk management in higher education, which has gone through several phases since it began in earnest in the late 20th century when colleges and universities started responding to increased personal injury and campus safety litigation. These risk management programs, tailored to protect institutions, eventually expanded to include Title IX, Occupational Safety and Health Administration requirements, environmental regulations, reputation management, crisis communications, cybersecurity and, most relevantly for this topic, financial sustainability. Loan and degree insurance represent the latest iteration of such efforts.

    For now, colleges typically pay for these programs, though it is unclear how much of the cost is passed on to students through tuition. How students are selected for inclusion in these programs is also opaque. Institutions are free to determine which students and majors are offered the program. Augustana College’s website, for example, says that it offers degree insurance at no direct cost to the student, but participation is on an invitation-only basis.

    There are, of course, reasons to defend these programs. Scrutiny of the student loan system, which has resulted in a student debt crisis, has intensified across the political spectrum, as policymakers from both parties recognize the harm it has caused (even as they disagree on the solutions). LRAPs and degree insurance may decrease the rate of loan default and reassure low-income families who were unable to save for college and are averse to taking on loans to pay for college.

    In an environment marked by increasing competition for students, admissions professionals see offering LRAPs and degree insurance as a competitive advantage. Loan repayment and degree insurance plans also encourage students not only to enroll in college in general but to pursue degrees with more challenging career prospects, which are also often the ones at risk of being cut due to low enrollment. This is increasingly relevant given the almost daily news of program closures.

    The arrival of these financial instruments is perhaps an understandable response to the rising cost of a college education, increased competition for students, overall wage stagnation and shifting public views about the purpose, value and outcomes of higher education. The adoption of these tools, however, is not simply driven by the current circulation of the idea of college education as a risk; it also further reinforces that view.

    These programs are not simply a new and neutral financial option for students. By extending the logics of institutional risk management to the economic futures of students, these tools cement the troubling, and potentially self-defeating, idea that a college degree itself is a financial risk requiring protection rather than the most reliable path to upward mobility and a critical component of our continued economic and cultural prosperity. Their adoption by colleges and universities is a reflection of the “short-termism” that has increasingly marked higher education strategy. As more institutions inevitably adopt these programs, it is unclear how long they will remain a competitive advantage. Furthermore, as the trend spreads, we may see the labor market respond, with employers lowering entry-level salaries even further as they take into account insurance payouts. Indeed, like many aspects of higher education today, it feels like a race to the bottom.

    Comparisons between insurance products and other forms of income or employment assurances are difficult to make. Should families prioritize colleges with strong outcomes (e.g., graduation rates upward of 70 percent and reassuring post-graduation employment statistics), robust alumni networks, or loan and insurance programs? It is also too early to tell what the consequences of transferring the risk to third parties, a common higher education risk management strategy, might be for students and institutions in the long term. And, it further financializes education, such that in the process of character formation, managing risk, rather than other values or logics, becomes central to identity.

    Colleges and universities might want to ask themselves whether treating college degrees as a risk serves their long-term interests. Loan and degree insurance products may deliver short-term enrollment gains, ease families’ anxieties, and even encourage students to pursue majors often viewed as less “marketable.” In the long-term, however, these strategies relieve the pressure to address underlying structural challenges such as rising costs, stagnant wages and a flawed loan system. Ultimately, they undermine our ability to make the case for higher education as a public good, thus putting the future of the entire endeavor at risk.

    Margarita Rayzberg is an assistant professor of sociology and criminology at Valparaiso University.

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  • Grad Programs Brace for Loan Caps

    Grad Programs Brace for Loan Caps

    Most of the colleges with the largest graduate programs in the country don’t have clear plans for how they’ll deal with new loan caps, set to kick in next July. And if they do, they aren’t taking publicly about it.

    For years, students could borrow essentially unlimited funds to pay for graduate education, thanks to a program known as Grad PLUS that capped loans at the cost of attendance. Republicans in Congress and other critics have argued that colleges took advantage of this program and raised their prices, fueling the student debt crisis. Loans for grad students make up nearly half of the federal loan portfolio.

    Along the way, colleges have begun to rely on graduate education to fund their university operations, higher ed experts say.

    But now that two-decade-old system is ending. Congress eliminated Grad PLUS over the summer and will cap how much students can borrow for graduate education. Lawmakers also limited Parent PLUS loans, which were also previously uncapped and offered families a way to make up the gap and pay for college. Both changes came out of the One Big Beautiful Bill Act.

    Beginning next summer, most graduate programs will have a federal loan cap of $100,000, with exceptions for a scaled-down number of professional programs with a limit set at $200,000. Those changes have created uncertainty for graduate schools and students who are navigating a changing landscape with fewer resources. Experts say graduate schools could face enrollment declines and some could shutter, thanks to the new limits.

    Even before the loan caps, graduate education was facing a reckoning, particularly after the Trump administration clamped down on federal research funding. Colleges paused graduate admissions for doctoral programs, and sometimes rescinded offers. Meanwhile, colleges are starting to rethink their approaches to humanities doctoral programs, among other shifts in this space.

    Planning for Change

    To better understand how universities are planning ahead, Inside Higher Ed reached out to 20 of the largest graduate programs in the nation. Most did not respond. Those that did emphasized a mix of increased corporate engagement and expanded loan options, among other measures.

    But for the most part, many appear to still be figuring it out.

    “We’re spending a lot of time this year looking at diversifying the streams of funding for graduate students,” said Bonnie Ferri, vice provost for graduate and postdoctoral education at Georgia Institute of Technology.

    Ferri noted that while Georgia Tech already has corporate partnerships that sponsor projects, which in turn help fund students, the university is doubling down on those efforts this year and “focusing on being more systematic” to spread those dollars across more graduate programs.

    At a recent University of Florida Board of Trustees meeting, Vice President and Chief Enrollment Strategist, Mary Parker, said UF will “have to figure out how to fill the gap for our students” as loan options diminish. She noted UF is rolling out Scholarship Universe, a tool to help students find internal and external scholarships. Parker said UF is also “looking at the expansion of our institution loan program” and the university will also help students identify private loan options.

    University of Illinois Urbana-Champaign spokesperson Patrick Wade told Inside Higher Ed by email that Illinois is still in the planning process and it is too early to share specific details. But Wade added that university officials “are directing units to begin developing contingency plans and to communicate proactively with current and prospective students, particularly in professionally oriented programs, where we expect recent changes to have the greatest impact.”

    Several other institutions said it was too early to share details about how they’ll fill loan gaps.

    Grad Enrollment Fallout

    Some experts believe the changes to federal loans will leave students scrambling.

    “I think when we get to July 1 next year, when these caps are scheduled to go into place, there will be a lot of students who are going to need to come up with another way of paying for graduate school than what’s been true in the past,” Jordan Matsudaira, director of the Postsecondary Education & Economics Research at American University, told Inside Higher Ed.

    Research led by Matsudaira projects that programs such as dentistry, osteopathy and medicine will be particularly squeezed by the changes.

    And given the many other pressures on university budgets, such as federal research funding challenges, federal efforts to limit international enrollment, and the looming demographic cliff, Matsudaira doesn’t expect universities to lower graduate tuition or significantly increase aid.

    “I just think institution budgets are going to be under so much pressure from so many different things that it is just incredibly optimistic thinking, bordering on fantasy, to believe that they’re going to come up with substantial sources of funding to be able to either cut their graduate school prices or be able to fund their own loan program to enroll students,” he said.

    (Some experts have suggested that states should get involved by providing low or no-interest loans as the Grad Plus loan option goes away.)

    Matsudaira expects a “very rough transition period over this coming year” for students. He also expects graduate enrollment to decline.

    “The question is how much does it reduce the number of students pursuing graduate school,” Matsudaira said.

    Private loans are one option students are likely to turn to. He believes private loans will surge, with the market growing from around $3 billion a year currently to $10 billion in the near future.

    But even private loans may prove difficult to obtain for some students.

    “If I had to make predictions, I would guess that private student loan providers will make loans available to students attending programs with a good track record of earnings and loan repayment, but it is less certain whether students in programs that tend to lead to lower earnings and/or worse loan repayment outcomes will be able to access private student loans,” Lesley Turner, an associate professor at the University of Chicago Harris School of Public Policy, wrote by email.

    She added private loans will have “fewer protections and less flexibility in repayment terms.”

    Turner expects that the fallout of the changes to graduate school funding will not only decrease enrollment but may even prod some institutions to shutter such programs as headcount falls.

    Credit rating agencies have also taken a dim view of what the changes will mean.

    “Institutions with a greater proportion of graduate students will likely face more pronounced impacts from these policy changes, particularly if they serve disproportionately high levels of aid- and loan-dependent students,” Fitch Ratings concluded in its 2026 sector outlook, which it described as deteriorating. “While private loan providers can fill gaps created by federal limits, private offerings may nevertheless deter students, as private loans will likely be offered with less favorable rates and limited flexibility compared to what was available under federal programs.”

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  • The Higher Education Inquirer is requesting all emails from the US Department of Education regarding selling off the student loan portfolio.

    The Higher Education Inquirer is requesting all emails from the US Department of Education regarding selling off the student loan portfolio.







    Higher Education Inquirer : The Higher Education Inquirer is requesting all emails from the US Department of Education regarding selling off the student loan portfolio.




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