Testimony: The Cost of College Is Too High, and Trump Is Making it Worse
On Wednesday, February 4, 2026, Julie Margetta Morgan, president of The Century Foundation, testified before the House Committee on Education and Workforce, Subcommittee on Higher Education and Workforce Development, at a hearing titled “Runaway College Spending Meets the Working Families Tax Cuts.” Her written testimony, which is reproduced below, focuses on the affordability crisis squeezing American families and making college increasingly out of reach, as well as what Congress can do to make higher education more accessible and affordable.
My name is Julie Margetta Morgan, and I am the President of The Century Foundation, a nonprofit public policy organization that conducts research and analysis on a number of issues, including higher education. I am also a former senior official at the U.S. Department of Education and at the Consumer Financial Protection Bureau (CFPB).
Today, I will focus on the affordability crisis that the Trump administration has created and that is squeezing families across the country, pushing college farther out of reach and driving people into debt. I will also discuss ways that Congress can bring down the cost of education after high school and ease the burdens weighing down working class families.
Many American Families Are Struggling to Stay Afloat, Let Alone Pay for College
I was invited here today to speak about the cost of higher education, but given the current financial instability that the Trump administration and Congress have inflicted on families across this country, it is impossible to speak about college affordability outside the context of other challenges. American families aren’t experiencing the high cost of education after high school in a vacuum; they are experiencing it as one of a mountain of expenses for things that are absolutely essential to their lives and that they cannot possibly afford. From everyday expenses like paying for groceries and utility bills to big outlays like medical bills, retirement savings, or home purchases, the Trump administration has increased the cost of living so much that families are increasingly turning to anger, despair, and indebtedness.
The actions Congress and President Trump have taken to drive up the cost of college are particularly troubling, because training after high school has long been the place Americans turn to find higher wages and greater financial stability. Unfortunately, for families across the country, the prospect of higher education has become a catch-22: going to college is very costly, and taking on debt to do so creates enormous financial risks. But not going to college can be impossibly costly as well. Adjusted for inflation, the earnings for those with only a high school diploma have not increased over the past twenty years, with median household earnings staying flat at around $58,000.1 Century Foundation’s recent survey of Americans’ financial stability found that those without a college credential experience a much harsher set of financial realities: they are about twice as likely as college-educated individuals to skip meals or medication to pay the bills, twice as likely to report being late on paying their bills, and far more likely to be turning to short-term debt to cover their expenses.2
Higher education was expensive before Donald Trump came into office, but actions taken by the Trump administration and by Congress have only made the situation far, far worse. The federal government has increased the costs for an array of basic expenses, from utilities to health care to child care, making it nearly impossible for a majority of Americans to stay afloat, let alone pay for big-ticket expenses like college. The combination of reckless and random tariffs, cuts to public programs like Medicare, SNAP, and student loans, and regulatory rollbacks that allow big companies to squeeze profits from ordinary people has driven up costs on everything from school supplies to car insurance to basic medical care. People are feeling acute financial pain as a result. The Century Foundation found that roughly three in ten voters had to delay or skip medical care in the past year due to cost, while nearly two-thirds switched to cheaper groceries or bought less food altogether.3 About half of all respondents had to tap into their savings just to cover everyday expenses.
Despite clear evidence that families are struggling, Congress and the Trump administration continue to drive average families deeper into despair. Last year’s H.R. 1, the so-called “Big Beautiful Bill,” is a prime example. The bill doled out massive tax cuts to the richest Americans at the expense of everyone else; according to the Congressional Budget Office, the richest families got a 2.7 percent increase in their income from the bill, while the lowest income lost 3.1 percent.4 To pay for this gift to the wealthy, Congress jacked up costs on average families’ health care, utilities, food, and education.5 While Congress was passing these major cost increases on families, the Trump administration also kept busy turning the screw on working families: for example, the Trump Department of Labor has announced efforts to decrease wages for home health workers,6 the Trump CFPB allowed banks to increase late fees on credit cards,7 and the Trump Department of Health and Human Services paved the way for health insurers to increase deductibles.8
The first year of the Trump administration was marked by so many efforts to increase costs and lower earnings for average families that it’s nearly impossible for organizations like mine to do the math on the full harm that has been inflicted. But families are doing the math for themselves, every week as they struggle to pay their bills and agonize over how to get ahead. According to a recent national survey, two-thirds of Americans believe that a middle-class lifestyle is out of reach for most people, and 58 percent believe that education has become unaffordable.9 This level of financial precarity will have long-lasting effects on college enrollment and indebtedness that increase inequality and act as a drag on our economy.
The Cost of College Is Too High, and Recent Changes Are Driving It Even Higher
Setting aside the larger forces straining family budgets, the cost of college is quite simply too high for most families to afford. According to the College Board, tuition and fees for full-time undergraduates were almost $12,000 for an in-state public college student, $4,000 for a community college, and more than $43,000 for a private nonprofit four year school.10 At a time when about 40 percent of Americans couldn’t cover a $400 emergency expense, even the cost of a short-term training program at a community college could send a student into debt or deter enrollment.
It wasn’t always like this. Families used to be able to pay for postsecondary education with a mix of grants and their monthly earnings, and many job training programs that are now offered by for-profit providers11 came for free through an employer or high school.12 In many cases, a part-time job was all it took to work your way through school, and generations of Americans were able to earn degrees or credentials without going into debt.13 Between 1975 to 2021, the overall cost of college increased by about 157 percent over inflation.14 Now, many students and families are shut out of higher education because of the cost of tuition and the difficulty of meeting their basic needs like housing, food, child care, and health care while in school.
For millions of students, the only option to afford postsecondary education is to take on mountains of student debt. Today, total federal student loan debt stands at nearly $1.7 billion, with the average federal student loan burden just under $40,000. 15 This is without including private student loan debt, which adds another $133 billion.16 Many borrowers struggle to repay their loans for decades, and many face long-term harm to their financial security and future as a result of shouldering this debt. The high cost of college leaves millions with insurmountable debt, creating long-term harm both to individuals’ earnings outcomes, families’ long-term economic security, and to America’s economy. Yet the same consequences await those that are prevented from pursuing higher education.
So why is college so expensive? For several decades now, the primary driver of rising costs for public colleges—the schools that over 70 percent of college students attend17—is inadequate federal and state investment in higher education.18 As states disinvested in public education, public institutions facing rising costs have pushed a greater share of the burden of cost onto students and their families. Research has shown how these deep cuts in state funding have contributed to rapid, significant tuition increases that disproportionately impact low-income students and worsen inequality in access and completion.19 For instance, in Nevada, state leaders recently approved tuition increases of 12 percent at public colleges and universities to address a $46.5 million state budget gap.20 The shift away from robust public funding for public colleges also shifts those schools away from fulfilling their public missions: many public institutions have adopted a business model that is more like a profit-seeking corporation than a government entity, recruiting wealthier out-of-state students and international students who can foot the bill for higher tuition, and offering amenities and educational programs more geared toward attracting revenue than fulfilling community needs. In fact, recent research suggests that public colleges and universities are using a significant share of their grant aid to attract higher income families rather than to support lower income ones. The Century Foundation estimates that more than half of students from the highest income families receive grants in excess of their financial need at public universities, while virtually none of the lowest income students do.21
In addition, federal grant aid has not kept up with rising tuition costs. The primary federal grant program for low income students, the Pell grant, covers less and less of the total cost of education after high school.22 Since 2005–06, the maximum Pell grant has increased just $720 after adjusting for inflation, while the cost of attendance at a public four-year institution has risen by $5,870 over the same period.23 And, while many students do not pay the full posted “sticker price” for college tuition, the net price that these families face—that is, the price after grant aid is accounted for—is still too far out of reach, in many cases requiring almost all of a family’s annual income. As a result, too many are shut out of higher education altogether, or, in some cases, only able to pursue higher education if they take on burdensome debt that may impede the efforts to achieve financial security for decades.
Rather than prioritize meaningful measures to reduce the financial burden of higher education for students and families, the Trump administration and this Congress have made it worse. For example, instead of using its ample authorities under the Higher Education Act and Dodd–Frank to weed out predatory colleges that are charging high prices, loading students with debt, and ripping them off, the Trump administration has taken the cops off the beat, sidelining the Consumer Financial Protection Bureau and eliminating Federal Student Aid’s enforcement unit.
Further, H.R. 1 exacerbates the college affordability crisis, while creating new and lucrative opportunities for the student loan industry to extract profits from students. H.R. 1 instituted new borrowing limits on certain federal student loans while doing nothing to limit tuition prices, ensuring that millions of students will have to turn to the private market for credit.24 The loan limits were touted as a way of creating downward pressure on college tuition prices. Instead, the evidence suggests that the limits are a gift to private lenders. Major private lenders like Sallie Mae, Navient, and SoFi lobbied for Congress to institute limits on federal student loans to create a gap in student financial aid that they could fill. As SoFi told its investors, their company would “be very happy to step in for the government” and would “absolutely capture that opportunity.”25
Now, the same bank lobbyists are back in front of Congress, warning that low-income students’ access to financing is in jeopardy and begging for more “regulatory relief” and corporate welfare—even floating the creation of a new system of federal loan guarantees.26 As this committee recalls, the last time Congress offered broad access to guaranteed federal student loans, it resulted in a boondoggle that drove one of the largest predatory lending scandals of the past half-century.27
As even the student loan industry admits, loan limits are very likely to cut off access to education, particularly for students of color. For example, at Historically Black Colleges and Universities (HBCUs), nearly 18 percent of undergraduate students used Parent PLUS loans to pay for college, a higher proportion than at any other type of institution.28 At several HBCUs, more than half of students are likely to need to borrow in excess of the Parent PLUS loan limits.29 Without additional investment in HBCUs, these critically important institutions will face significant financial challenges. These challenges will only exacerbate existing obstacles HBCUs already face due to historic inequitable funding.
The Century Foundation’s analysis found that 38 percent of adults would not qualify for a private loan for themselves or a family member based on their credit scores (or lack thereof), a figure that rises to 51 percent in low- or moderate-income neighborhoods.30 Research on credit scores shows that Black and Hispanic students may be disproportionately excluded from access, since communities of color experience higher rates of no or low credit scores. In fact, more than 60 percent of consumers in majority Black neighborhoods have no or low credit scores, and around 48 percent of consumers in majority Hispanic neighborhoods have no or low credit scores, reflecting long-standing inequities in access to wealth, credit, and financial stability.31 Some parts of the country would be more harmed than others, as well—for example, over 60 percent of adults in low or moderate income households in Louisiana, Mississippi, and Alabama would struggle to obtain a private student loan based on their credit history.32 For students from these communities, these credit barriers can limit access to financing, increase borrowing cost, and increase the risk of financial distress during and after college. Students’ access to higher education should not depend on their credit score, or their zip code.
Those students who do qualify for private loans will face higher interest rates and significantly greater risks associated with the private loan market. Private student loans typically lack the protections that federal student loans provide, such as income-based repayment options and paths to loan forgiveness.33 At the same time that Congress is pushing many borrowers toward the private student loan market, the Trump administration has dismantled the primary student loan watchdog agency, the Consumer Financial Protection Bureau, opening the door to a flood of abusive conduct in the private student loan market that will take years to address. In addition, H.R. 1 rescinded federal rules that provided a mechanism for students who were victims of fraud to obtain loan relief.
In addition to its direct attacks on college affordability, H.R. 1 quietly created a huge vulnerability for public higher education that is already driving up tuition prices in many states. H.R. 1’s cuts to Medicaid and SNAP require states to offset federal revenue changes and simultaneously implement expensive programs to comply with the law’s onerous work requirements. As states scramble to fill those gaps, they are very likely to cut appropriations for public higher education, leading to further tuition increases. In fact, several states, including Nevada34 and California,35 among others, are already moving to slash higher education funding or raise tuition prices. We’ve seen this play out before: in 2008, when state tax revenues declined as a result of the Great Recession, appropriations for higher education were one of the first targets for cuts. Between 2008 and 2012, average in-state tuition and fees rose 23 percent.36 A decade later, states had still not filled the gap in appropriations, and students were still paying higher tuition.
Student Loan Borrowers Are Facing Higher Costs, Too
Prospective college students aren’t the only ones being hurt by the Trump administration’s approach to college affordability. Students and graduates who have already borrowed are enduring a massive spike in student loan delinquency and default. According to our estimates, one out of every four borrowers with a payment due is currently delinquent. That is an astounding number, and it is nearly three times the rate of delinquency just prior to the pandemic-related student loan payment pause—the most recent point in time when student loan payments were due for all borrowers. Under President Trump’s watch, 3.6 million new borrowers missed nine months of payments or more—meeting the technical definition of a loan default and joining the 5.2 million borrowers who have remained in default on a student loan since the payment pause began.37 President Trump’s surge of borrower distress is unprecedented. The Century Foundation will be publishing new research later this month showing that student loan delinquency rates are especially high in the Sun Belt (e.g., Louisiana and Mississippi), the Rust Belt (e.g., Indiana and Ohio), and the Mid-Atlantic (e.g., Delaware and Maryland). Delinquencies and defaults damage students’ credit, leading to a domino effect that results in higher costs on everything from mortgages to car loans, for years to come. The Trump administration seemingly understands, at least on some level, the seriousness of this delinquency disaster, which is presumably why they abruptly delayed their efforts to garnish the wages of those who have defaulted on their student loans.38
However, the administration has also repeatedly blocked access to income-driven repayment, cutting off borrowers’ access to the repayment plans that they’re entitled to by law. In August, the administration mass-denied 328,000 applications,39 and at the end of December, 734,000 applications40 sat unprocessed. Now, the damage is done: millions have fallen into deep-subprime status and will have to pay thousands of dollars more to lease a car or buy a home, if they even qualify. Further, the Trump Department of Education has tied its own hands on student loans by slashing its workforce and seemingly spending more time trying to push the student loan program off on other agencies than on ensuring borrowers have straightforward ways to repay their loans.41
Congress has contributed to the student loan delinquency mess by repealing the Saving on a Valuable Education (SAVE) student loan repayment plan to pay for tax cuts that primarily benefit the ultra-wealthy. These changes are estimated to cost borrowers a total of $270 billion over the next decade.42 Eliminating SAVE will increase many borrowers’ monthly payments, to the tune of $2,800 to $4,800 per year for the typical borrower with a bachelor’s degree, and will lengthen the time that many students remain in debt. Congress also eliminated the opportunity for Parent PLUS borrowers to access income-driven repayment, locking them into the standard plan no matter how their financial circumstances change during repayment.
The Federal Government Must Lower College Costs for Good
The path that the Trump administration and Congress have set for higher education will have dangerous consequences for individual families and for our economy. American families need real relief, and they won’t be satisfied by incremental increases in grant aid or decreases in net price that generate congratulatory headlines but make no sizable difference in their ability to afford education. While there are many things that Congress can do, I urge you to focus on using the big levers that the federal government has to make real change.
For example, the federal government could use its muscular role in higher education finance to the advantage of millions of American families by negotiating down the price of college tuition. There is a strong, bipartisan precedent for this in Medicare, where the federal government assigns payment rates for health care services provided to Medicare beneficiaries.43 The federal government could do the same in higher education by placing limits on how much colleges that participate in federal aid can charge students. The most expansive version of this would look like free college tuition, paid for by a mix of federal and state resources.
In addition, Congress should ensure that the billions of dollars it invests in higher education each year are actually supporting meaningful access for all people, regardless of their background or income level. There is increasing evidence that, even within public higher education systems, the greatest resources go to institutions that educate students from the wealthiest families. Elite private colleges accept federal funds while maintaining admissions programs that favor legacy families and students from wealthy school districts. Meanwhile, schools that have focused specifically on educating students of color, like HBCUs and minority-serving institutions (MSIs), and open access institutions, have been historically underfunded. Public funding should support the public good, and Americans rely on our leaders in Congress to make that happen.
Congressional Budget Office, “How the 2025 Reconciliation Act (Public Law 119-21) Will Affect the Economic Resources Available to Households,” accessed February 1, 2026, https://www.cbo.gov/interactive/2025-reconciliation-act.
Derived from Federal Student Aid Data Center, “Federal Student Aid Portfolio Summary.” Average reflects federal student loan portfolio as December 31, 2025.
See Consumer Bankers Association, Recent Graduate Lending Reform (January 2026), https://consumerbankers.com/wp-content/uploads/2026/01/CBA_Recent-Graduate-Student-Lending-Reform-Analysis_01.2026-2.pdf. (“Participants also discussed whether a targeted federal guarantee could help ensure continued access to funding for students in fields with consistently lower earnings. In theory, a narrowly tailored, breakeven guarantee similar to elements of the Small Business Administration (SBA) or GSE models could reduce lenders’ downside risk and expand access for hard-to-underwrite borrowers.”)
See, e.g., Complaint, People of the State of Illinois v. Navient, Sallie Mae Bank, et. al. (2017), https://dig.abclocal.go.com/wls/documents/Navient%20Complaint.pdf. (“In the process of offering schools complete packages of loans, Sallie Mae included subprime loans as the loss-leader to gain access to its more profitable federal loan and prime loan volume.”)
Congress.gov. “Amendments to the Higher Education Act Made by P.L. 119-21, the FY2025 Budget Reconciliation Law,” January 29, 2026, https://www.congress.gov/crs-product/R48727.
Testimony: The Cost of College Is Too High, and Trump Is Making it Worse
On Wednesday, February 4, 2026, Julie Margetta Morgan, president of The Century Foundation, testified before the House Committee on Education and Workforce, Subcommittee on Higher Education and Workforce Development, at a hearing titled “Runaway College Spending Meets the Working Families Tax Cuts.” Her written testimony, which is reproduced below, focuses on the affordability crisis squeezing American families and making college increasingly out of reach, as well as what Congress can do to make higher education more accessible and affordable.
My name is Julie Margetta Morgan, and I am the President of The Century Foundation, a nonprofit public policy organization that conducts research and analysis on a number of issues, including higher education. I am also a former senior official at the U.S. Department of Education and at the Consumer Financial Protection Bureau (CFPB).
Today, I will focus on the affordability crisis that the Trump administration has created and that is squeezing families across the country, pushing college farther out of reach and driving people into debt. I will also discuss ways that Congress can bring down the cost of education after high school and ease the burdens weighing down working class families.
Many American Families Are Struggling to Stay Afloat, Let Alone Pay for College
I was invited here today to speak about the cost of higher education, but given the current financial instability that the Trump administration and Congress have inflicted on families across this country, it is impossible to speak about college affordability outside the context of other challenges. American families aren’t experiencing the high cost of education after high school in a vacuum; they are experiencing it as one of a mountain of expenses for things that are absolutely essential to their lives and that they cannot possibly afford. From everyday expenses like paying for groceries and utility bills to big outlays like medical bills, retirement savings, or home purchases, the Trump administration has increased the cost of living so much that families are increasingly turning to anger, despair, and indebtedness.
The actions Congress and President Trump have taken to drive up the cost of college are particularly troubling, because training after high school has long been the place Americans turn to find higher wages and greater financial stability. Unfortunately, for families across the country, the prospect of higher education has become a catch-22: going to college is very costly, and taking on debt to do so creates enormous financial risks. But not going to college can be impossibly costly as well. Adjusted for inflation, the earnings for those with only a high school diploma have not increased over the past twenty years, with median household earnings staying flat at around $58,000.1 Century Foundation’s recent survey of Americans’ financial stability found that those without a college credential experience a much harsher set of financial realities: they are about twice as likely as college-educated individuals to skip meals or medication to pay the bills, twice as likely to report being late on paying their bills, and far more likely to be turning to short-term debt to cover their expenses.2
Higher education was expensive before Donald Trump came into office, but actions taken by the Trump administration and by Congress have only made the situation far, far worse. The federal government has increased the costs for an array of basic expenses, from utilities to health care to child care, making it nearly impossible for a majority of Americans to stay afloat, let alone pay for big-ticket expenses like college. The combination of reckless and random tariffs, cuts to public programs like Medicare, SNAP, and student loans, and regulatory rollbacks that allow big companies to squeeze profits from ordinary people has driven up costs on everything from school supplies to car insurance to basic medical care. People are feeling acute financial pain as a result. The Century Foundation found that roughly three in ten voters had to delay or skip medical care in the past year due to cost, while nearly two-thirds switched to cheaper groceries or bought less food altogether.3 About half of all respondents had to tap into their savings just to cover everyday expenses.
Despite clear evidence that families are struggling, Congress and the Trump administration continue to drive average families deeper into despair. Last year’s H.R. 1, the so-called “Big Beautiful Bill,” is a prime example. The bill doled out massive tax cuts to the richest Americans at the expense of everyone else; according to the Congressional Budget Office, the richest families got a 2.7 percent increase in their income from the bill, while the lowest income lost 3.1 percent.4 To pay for this gift to the wealthy, Congress jacked up costs on average families’ health care, utilities, food, and education.5 While Congress was passing these major cost increases on families, the Trump administration also kept busy turning the screw on working families: for example, the Trump Department of Labor has announced efforts to decrease wages for home health workers,6 the Trump CFPB allowed banks to increase late fees on credit cards,7 and the Trump Department of Health and Human Services paved the way for health insurers to increase deductibles.8
The first year of the Trump administration was marked by so many efforts to increase costs and lower earnings for average families that it’s nearly impossible for organizations like mine to do the math on the full harm that has been inflicted. But families are doing the math for themselves, every week as they struggle to pay their bills and agonize over how to get ahead. According to a recent national survey, two-thirds of Americans believe that a middle-class lifestyle is out of reach for most people, and 58 percent believe that education has become unaffordable.9 This level of financial precarity will have long-lasting effects on college enrollment and indebtedness that increase inequality and act as a drag on our economy.
The Cost of College Is Too High, and Recent Changes Are Driving It Even Higher
Setting aside the larger forces straining family budgets, the cost of college is quite simply too high for most families to afford. According to the College Board, tuition and fees for full-time undergraduates were almost $12,000 for an in-state public college student, $4,000 for a community college, and more than $43,000 for a private nonprofit four year school.10 At a time when about 40 percent of Americans couldn’t cover a $400 emergency expense, even the cost of a short-term training program at a community college could send a student into debt or deter enrollment.
It wasn’t always like this. Families used to be able to pay for postsecondary education with a mix of grants and their monthly earnings, and many job training programs that are now offered by for-profit providers11 came for free through an employer or high school.12 In many cases, a part-time job was all it took to work your way through school, and generations of Americans were able to earn degrees or credentials without going into debt.13 Between 1975 to 2021, the overall cost of college increased by about 157 percent over inflation.14 Now, many students and families are shut out of higher education because of the cost of tuition and the difficulty of meeting their basic needs like housing, food, child care, and health care while in school.
For millions of students, the only option to afford postsecondary education is to take on mountains of student debt. Today, total federal student loan debt stands at nearly $1.7 billion, with the average federal student loan burden just under $40,000. 15 This is without including private student loan debt, which adds another $133 billion.16 Many borrowers struggle to repay their loans for decades, and many face long-term harm to their financial security and future as a result of shouldering this debt. The high cost of college leaves millions with insurmountable debt, creating long-term harm both to individuals’ earnings outcomes, families’ long-term economic security, and to America’s economy. Yet the same consequences await those that are prevented from pursuing higher education.
So why is college so expensive? For several decades now, the primary driver of rising costs for public colleges—the schools that over 70 percent of college students attend17—is inadequate federal and state investment in higher education.18 As states disinvested in public education, public institutions facing rising costs have pushed a greater share of the burden of cost onto students and their families. Research has shown how these deep cuts in state funding have contributed to rapid, significant tuition increases that disproportionately impact low-income students and worsen inequality in access and completion.19 For instance, in Nevada, state leaders recently approved tuition increases of 12 percent at public colleges and universities to address a $46.5 million state budget gap.20 The shift away from robust public funding for public colleges also shifts those schools away from fulfilling their public missions: many public institutions have adopted a business model that is more like a profit-seeking corporation than a government entity, recruiting wealthier out-of-state students and international students who can foot the bill for higher tuition, and offering amenities and educational programs more geared toward attracting revenue than fulfilling community needs. In fact, recent research suggests that public colleges and universities are using a significant share of their grant aid to attract higher income families rather than to support lower income ones. The Century Foundation estimates that more than half of students from the highest income families receive grants in excess of their financial need at public universities, while virtually none of the lowest income students do.21
In addition, federal grant aid has not kept up with rising tuition costs. The primary federal grant program for low income students, the Pell grant, covers less and less of the total cost of education after high school.22 Since 2005–06, the maximum Pell grant has increased just $720 after adjusting for inflation, while the cost of attendance at a public four-year institution has risen by $5,870 over the same period.23 And, while many students do not pay the full posted “sticker price” for college tuition, the net price that these families face—that is, the price after grant aid is accounted for—is still too far out of reach, in many cases requiring almost all of a family’s annual income. As a result, too many are shut out of higher education altogether, or, in some cases, only able to pursue higher education if they take on burdensome debt that may impede the efforts to achieve financial security for decades.
Rather than prioritize meaningful measures to reduce the financial burden of higher education for students and families, the Trump administration and this Congress have made it worse. For example, instead of using its ample authorities under the Higher Education Act and Dodd–Frank to weed out predatory colleges that are charging high prices, loading students with debt, and ripping them off, the Trump administration has taken the cops off the beat, sidelining the Consumer Financial Protection Bureau and eliminating Federal Student Aid’s enforcement unit.
Further, H.R. 1 exacerbates the college affordability crisis, while creating new and lucrative opportunities for the student loan industry to extract profits from students. H.R. 1 instituted new borrowing limits on certain federal student loans while doing nothing to limit tuition prices, ensuring that millions of students will have to turn to the private market for credit.24 The loan limits were touted as a way of creating downward pressure on college tuition prices. Instead, the evidence suggests that the limits are a gift to private lenders. Major private lenders like Sallie Mae, Navient, and SoFi lobbied for Congress to institute limits on federal student loans to create a gap in student financial aid that they could fill. As SoFi told its investors, their company would “be very happy to step in for the government” and would “absolutely capture that opportunity.”25
Now, the same bank lobbyists are back in front of Congress, warning that low-income students’ access to financing is in jeopardy and begging for more “regulatory relief” and corporate welfare—even floating the creation of a new system of federal loan guarantees.26 As this committee recalls, the last time Congress offered broad access to guaranteed federal student loans, it resulted in a boondoggle that drove one of the largest predatory lending scandals of the past half-century.27
As even the student loan industry admits, loan limits are very likely to cut off access to education, particularly for students of color. For example, at Historically Black Colleges and Universities (HBCUs), nearly 18 percent of undergraduate students used Parent PLUS loans to pay for college, a higher proportion than at any other type of institution.28 At several HBCUs, more than half of students are likely to need to borrow in excess of the Parent PLUS loan limits.29 Without additional investment in HBCUs, these critically important institutions will face significant financial challenges. These challenges will only exacerbate existing obstacles HBCUs already face due to historic inequitable funding.
The Century Foundation’s analysis found that 38 percent of adults would not qualify for a private loan for themselves or a family member based on their credit scores (or lack thereof), a figure that rises to 51 percent in low- or moderate-income neighborhoods.30 Research on credit scores shows that Black and Hispanic students may be disproportionately excluded from access, since communities of color experience higher rates of no or low credit scores. In fact, more than 60 percent of consumers in majority Black neighborhoods have no or low credit scores, and around 48 percent of consumers in majority Hispanic neighborhoods have no or low credit scores, reflecting long-standing inequities in access to wealth, credit, and financial stability.31 Some parts of the country would be more harmed than others, as well—for example, over 60 percent of adults in low or moderate income households in Louisiana, Mississippi, and Alabama would struggle to obtain a private student loan based on their credit history.32 For students from these communities, these credit barriers can limit access to financing, increase borrowing cost, and increase the risk of financial distress during and after college. Students’ access to higher education should not depend on their credit score, or their zip code.
Those students who do qualify for private loans will face higher interest rates and significantly greater risks associated with the private loan market. Private student loans typically lack the protections that federal student loans provide, such as income-based repayment options and paths to loan forgiveness.33 At the same time that Congress is pushing many borrowers toward the private student loan market, the Trump administration has dismantled the primary student loan watchdog agency, the Consumer Financial Protection Bureau, opening the door to a flood of abusive conduct in the private student loan market that will take years to address. In addition, H.R. 1 rescinded federal rules that provided a mechanism for students who were victims of fraud to obtain loan relief.
In addition to its direct attacks on college affordability, H.R. 1 quietly created a huge vulnerability for public higher education that is already driving up tuition prices in many states. H.R. 1’s cuts to Medicaid and SNAP require states to offset federal revenue changes and simultaneously implement expensive programs to comply with the law’s onerous work requirements. As states scramble to fill those gaps, they are very likely to cut appropriations for public higher education, leading to further tuition increases. In fact, several states, including Nevada34 and California,35 among others, are already moving to slash higher education funding or raise tuition prices. We’ve seen this play out before: in 2008, when state tax revenues declined as a result of the Great Recession, appropriations for higher education were one of the first targets for cuts. Between 2008 and 2012, average in-state tuition and fees rose 23 percent.36 A decade later, states had still not filled the gap in appropriations, and students were still paying higher tuition.
Student Loan Borrowers Are Facing Higher Costs, Too
Prospective college students aren’t the only ones being hurt by the Trump administration’s approach to college affordability. Students and graduates who have already borrowed are enduring a massive spike in student loan delinquency and default. According to our estimates, one out of every four borrowers with a payment due is currently delinquent. That is an astounding number, and it is nearly three times the rate of delinquency just prior to the pandemic-related student loan payment pause—the most recent point in time when student loan payments were due for all borrowers. Under President Trump’s watch, 3.6 million new borrowers missed nine months of payments or more—meeting the technical definition of a loan default and joining the 5.2 million borrowers who have remained in default on a student loan since the payment pause began.37 President Trump’s surge of borrower distress is unprecedented. The Century Foundation will be publishing new research later this month showing that student loan delinquency rates are especially high in the Sun Belt (e.g., Louisiana and Mississippi), the Rust Belt (e.g., Indiana and Ohio), and the Mid-Atlantic (e.g., Delaware and Maryland). Delinquencies and defaults damage students’ credit, leading to a domino effect that results in higher costs on everything from mortgages to car loans, for years to come. The Trump administration seemingly understands, at least on some level, the seriousness of this delinquency disaster, which is presumably why they abruptly delayed their efforts to garnish the wages of those who have defaulted on their student loans.38
However, the administration has also repeatedly blocked access to income-driven repayment, cutting off borrowers’ access to the repayment plans that they’re entitled to by law. In August, the administration mass-denied 328,000 applications,39 and at the end of December, 734,000 applications40 sat unprocessed. Now, the damage is done: millions have fallen into deep-subprime status and will have to pay thousands of dollars more to lease a car or buy a home, if they even qualify. Further, the Trump Department of Education has tied its own hands on student loans by slashing its workforce and seemingly spending more time trying to push the student loan program off on other agencies than on ensuring borrowers have straightforward ways to repay their loans.41
Congress has contributed to the student loan delinquency mess by repealing the Saving on a Valuable Education (SAVE) student loan repayment plan to pay for tax cuts that primarily benefit the ultra-wealthy. These changes are estimated to cost borrowers a total of $270 billion over the next decade.42 Eliminating SAVE will increase many borrowers’ monthly payments, to the tune of $2,800 to $4,800 per year for the typical borrower with a bachelor’s degree, and will lengthen the time that many students remain in debt. Congress also eliminated the opportunity for Parent PLUS borrowers to access income-driven repayment, locking them into the standard plan no matter how their financial circumstances change during repayment.
The Federal Government Must Lower College Costs for Good
The path that the Trump administration and Congress have set for higher education will have dangerous consequences for individual families and for our economy. American families need real relief, and they won’t be satisfied by incremental increases in grant aid or decreases in net price that generate congratulatory headlines but make no sizable difference in their ability to afford education. While there are many things that Congress can do, I urge you to focus on using the big levers that the federal government has to make real change.
For example, the federal government could use its muscular role in higher education finance to the advantage of millions of American families by negotiating down the price of college tuition. There is a strong, bipartisan precedent for this in Medicare, where the federal government assigns payment rates for health care services provided to Medicare beneficiaries.43 The federal government could do the same in higher education by placing limits on how much colleges that participate in federal aid can charge students. The most expansive version of this would look like free college tuition, paid for by a mix of federal and state resources.
In addition, Congress should ensure that the billions of dollars it invests in higher education each year are actually supporting meaningful access for all people, regardless of their background or income level. There is increasing evidence that, even within public higher education systems, the greatest resources go to institutions that educate students from the wealthiest families. Elite private colleges accept federal funds while maintaining admissions programs that favor legacy families and students from wealthy school districts. Meanwhile, schools that have focused specifically on educating students of color, like HBCUs and minority-serving institutions (MSIs), and open access institutions, have been historically underfunded. Public funding should support the public good, and Americans rely on our leaders in Congress to make that happen.
Notes
Tags: higher education, college tuition, college costs