Dalvin Brown and Oyin Adedoyin:
The federal government is retreating from its central role in financing higher education.
President Trump’s big tax-and-spending law includes new restrictions on how much students can borrow and how they repay. The provisions begin to reverse the government’s near takeover of the $1.7 trillion student lending market over the past six decades.
As a result, families are reassessing the costs and risks of college. Many are likely to turn to private lenders, which typically charge higher interest rates and require creditworthy cosigners. Those lenders recently accounted for some 8% of outstanding loans, according to data from Enterval Analytics.
In particular, as many as half of graduate-student borrowers may take private loans to cover funding gaps, according to Jordan Matsudaira, director of the Postsecondary Education & Economics Research Center at American University, and former chief economist at the Education Department.
Republican lawmakers say they want to reduce taxpayer risk from the ballooning federal student-loan portfolio while forcing colleges to curb their prices.