A budget resolution under consideration in the Senate includes provisions that would limit the amount graduate students can borrow in federal student loans. This could send medical students and others with high graduate school costs to the private student loan market to finance their education.
“The overall budget reconciliation legislation is aiming to balance the cost of tax cuts against cuts to spending in other areas,” says Lesley Turner, an economist and associate professor at the University of Chicago. “Eliminating or reducing access to federal loan programs is one way to do that.”
The Department of Education’s Grad PLUS loans currently allow students to borrow up to the total cost of attendance for their program. However, the proposal would eliminate this program and impose new borrowing limits, which may force students with high graduate school costs to explore more costly private loan options.
What Are the Proposed Changes?
Prior to 2006, there were strict annual and lifetime limits on federal student loan borrowing. The Grad PLUS program was created in 2006 and effectively lifted those limits, allowing students pursuing advanced degrees to borrow up to the full cost of attendance for their program.
Under the current proposal, annual and lifetime limits would return, leaving many graduate students with education costs that could no longer be covered by federal student loans. According to Turner, when adjusted for inflation, the limits outlined in the Senate resolution would be even lower than pre-2006 levels.
Suzanne Ortega, president of the Council of Graduate Schools, says the proposal poses a challenge to both students and universities. Students may need to find alternative ways to finance their education, and universities may have to adjust their programs to better accommodate students’ funding challenges.
“To be very honest, I think people are just starting to really think through the implications … as they think it through, it’s with horror,” says Ortega.
She adds that, for prospective students, the new reality will be taking out private loans or simply not pursuing the degree — potentially affecting enrollment numbers and causing schools to cut programs. “And to what consequence for local communities, for individuals, for industries that are affected by a constriction in the pipeline into the workforce?” asks Ortega.
[Read: Best Private Student Loans.]
The Impact on Future Doctors
The total cost of attendance for medical school and other advanced professional degree programs would likely exceed the proposed borrowing limits on federal loans — meaning those looking to pursue careers in these fields would have to find other, likely more expensive, ways to cover their tuition.
Cost barriers are also exacerbated in the health care field by lengthy internship requirements, according to Ortega, which prevent students from reducing costs through early program completion. There are rising concerns that the increased cost burden may deter students from entering the medical field at a time when the U.S. health care system is already severely understaffed.
[See: Best Medical Loans]
Should Students Take Out Private Loans?
With restrictions on federal loans, private student loans would become a more prominent source of financing for advanced degrees. However, there are several risks and limitations on private loans that Turner says could cause students to think twice.
Unlike federal student loans, most private loans don’t offer income-driven repayment plans or loan forgiveness programs. Private loans are also typically less generous with financial hardship options like forbearance and deferment, and tend to charge higher interest rates than federal loans.
Moreover, not everyone is eligible for private loans. Private lenders typically have more stringent credit requirements and are more selective about which degree programs and institutions make you eligible for a loan.
Evaluating Cost vs. Benefit
With the potential for increased borrowing costs, Turner and Ortega both emphasize the importance of thoroughly researching your potential graduate program. Students should compare similar programs, cost differences, program completion rates, career outcomes and determine whether their expected income will be sufficient to repay their loans.
While not always immediately available, this information is key to making informed decisions about your graduate education. Turner says the burden of the research is largely on the student to find what program and financing option will best suit their situation.
“Every university and graduate program should be prepared to tell you exactly what that program will cost, how long it will take and what the career outcomes of recent graduates have been,” says Ortega.
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Not What the Doctor Ordered: GOP Budget Bill Could Limit Borrowing Options originally appeared on usnews.com
