An expansive overhaul to the federal student loan program includes new borrowing caps that industry groups and advocates say could curtail the number of prospective graduate students who pursue advanced degrees in key fields.
Some states also foresee a potential problem: Shortages of workers in in-demand professions and reduced enrollment in their colleges.
Connecticut’s governor is hoping he has a solution that will attract and retain those workers while also maintaining the strength of graduate programs within his state. He wants the state to establish its own graduate student loans program to fill the expected gap created by the federal limits.
Gov. Ned Lamont earlier this month proposed legislation that would set up the Connecticut Supplemental Graduate Student Loan Program, saying the goal is to allow students in the state to continue to have access to the low-interest loans they need to complete their degrees. The Democrat’s proposal will likely enjoy considerable support, as his party controls both chambers of the state’s General Assembly.
“For decades, lower- and middle-income students have depended on these low-interest loans to seek careers in good-paying professions, and now these recent federal changes are going to make graduate programs out of reach for many students who dream of pursuing a graduate degree,” Lamont said in announcing his proposal.
The proposal is a response to President Donald Trump’s One Big Beautiful Bill Act, which brings in sweeping changes to the federal student loan program. Administration officials say the overhaul, set to go into effect in July, is aimed at reducing the country’s student loan debt and bringing down the price of college attendance. In addition to introducing new repayment plans and eliminating others, the Department of Education will impose tighter limits on how much parents and graduate students can borrow for college.
For the past two decades, graduate students have been able to borrow up to the full cost of attendance through federal Grad PLUS loans, which don’t require a certain credit score or debt-to-income ratio to qualify. However, Grad PLUS loans will be eliminated on July 1, and graduate borrowers will be held to new loan caps.
But those limits depend on what you’re studying. Students pursing “professional” degrees will be allowed to borrow $50,000 per year up to a lifetime maximum of $200,000. All other graduate students will be capped at $20,500 per year and $100,000 total.
The administration caused a stir several months ago when its list of those degrees deemed “professional” omitted several fields of study, including nursing, education and social work. Industry groups blasted the decision, saying it would discourage some workers from pursuing those degrees and force others to turn to private student loans, which don’t typically offer the same protections and benefits as federal loans. Nursing stood out in particular, as it was left off while other health care degrees such as medicine, dentistry and podiatry made the cut for higher limits.
Lamont’s proposal “recognizes what’s at stake,” said Jennifer Jackson, CEO of the Connecticut Hospital Association.
“At a time when the need to nurture and grow the health care workforce has never been greater, we must focus on strengthening recruitment, expanding access to education, and supporting attainable pathways into high-demand fields, not creating new barriers,” Jackson said in a statement applauding the legislation.
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Will More States Set Up Graduate Student Loan Programs?
Graduate students have become some of the nation’s biggest borrowers, and even the seemingly high loan limits of $100,000 to $200,000 aren’t enough for some to cover tuition.
Because graduate programs often come with high price tags and many students pursuing those degrees haven’t yet built up extensive savings, graduate borrowers tend to take out larger student loans than other groups. Graduate student loans make up roughly half the outstanding $1.7 trillion student debt, according to the Department of Education.
Historical data suggests many graduate students won’t need to borrow more than the new limits allow, but more than a quarter likely will need additional financing.
About 28% of graduate students borrow above the new federal caps, with the average amount borrowed over the new limits being around $21,700, according to a December report from the Federal Reserve Bank of Philadelphia that analyzed data from recent years. Researchers found that nearly four in 10 of those students have credit history that would likely prevent them from qualifying for private student loans without a cosigner.
Those students in particular may rely on states like Connecticut to create financing programs. Like many states, Connecticut already has a quasi-public entity that provides low-interest student loans to state and regional students. Lamont says that nonprofit, the Connecticut Higher Education Supplemental Loan Authority, would administer the new program, while the state would allocate $10 million to launch it.
And while nonprofit lenders like CHESLA often have relatively low fixed rates and other benefits, you’ll typically need to meet underwriting qualifications as you would with a private lender. Students must meet credit and debt-to-income requirements to qualify for a CHESLA loan, although all borrowers pay the same interest rate regardless of credit score.
The proposal for the new graduate lending program doesn’t lay out specific criteria for how students would qualify for loans. That would take place later. For the program to serve its intended purpose, it would have to set a lower bar for eligibility than current nonprofit lenders have, says Tom O’Hare, holistic college advisor at Get College Going.
“If it’s a full-blown replacement program (for Grad PLUS), that would be staggering,” he says. “But if it’s a copycat of the programs that are already out there now, then why do we need it?”
He says if the program is successful, he expects other states to explore their own variations of graduate student loan programs.
The Connecticut bill is going through committee review, and a public hearing is expected in the coming weeks.
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Trump Is Capping Grad Student Loans. Connecticut Has a Backup Plan. originally appeared on usnews.com
