Earlier this year, Representative Virginia Foxx (R-NC) proposed the College Cost Reduction Act (CCRA), a broad set of reforms to federal higher education programs that includes new limits on what students can borrow in the student loan program. The bill, which was approved in committee in January 2024 and now awaits consideration before the full House, replaces the current set of annual student loan limits that vary by students’ circumstances and sets the limits to the national median cost of attendance by program of study. The bill eliminates the Parent and Grad PLUS loan programs that allow parents of dependent undergraduates and graduate students to borrow up to the full cost of attendance at each institution, with no total limit. The CCRA also establishes new total borrowing caps: $50,000 for undergraduates and $100,000 and $150,000 for graduate and professional students, respectively.
Advocacy groups have argued that the CCRA’s loan limits will restrict access to higher education and will cause students and families to take out more costly private loans. Analyzing data to compare the CCRA’s loan limits with recent borrowing patterns to assess which students could gain access to additional loans and which groups may have their borrowing constrained could evaluate advocacy groups’ claims and help policymakers weigh the trade-offs in reforming loan limits.
Key Takeaways
Using data from the 2019–20 National Postsecondary Student Aid Study, key findings include the following:
- The CCRA’s annual limits are at least double what the median federal loan borrower among dependent undergraduates takes out. Only 6.3 and 6.9 percent of dependent undergraduates pursuing associate’s and bachelor’s degrees borrowed more than the CCRA’s proposed limits for those degrees, respectively.
- Dependent undergraduates pursuing certificates (18.8 percent) and dependent students pursuing bachelor’s degrees (16.7 percent) are more likely than other undergraduates to have exceeded the estimate for the CCRA’s annual and aggregate loan limits, respectively.
- Independent students pursuing bachelor’s degrees are the most likely group of undergraduates to be constrained by the CCRA’s proposed limits; 23.2 percent took out more than the CCRA’s aggregate $50,000 limit.
- Graduate and professional students are more likely than undergraduates to be affected by the CCRA’s annual and aggregate loan limits. About one in five master’s degree students would be required to reduce what they borrow annually. The effects will be even more pronounced for students pursuing professional degrees, especially those in medicine and other health care professions.
Implications
Under the CCRA, most undergraduates will gain access to much higher loan limits than under current policy, and overall borrowing among undergraduates is likely to increase. Some may consider this a positive outcome, since an increase in loan limits would restore the purchasing power of federal loans that has been lost to inflation and because loans to undergraduates also carry lower interest rates and more generous income-based repayment options than private loans.
But there are risks to raising the loan limits for undergraduates, especially to the full cost of attendance for the typical program. The current loan limits can help protect students from overborrowing and prevent colleges and universities from raising prices because they are often well below a student’s cost of attendance. But under the CCRA, all students will be able to borrow at or close to the full cost of attendance, making it important to protect students from taking on debts they cannot afford and preventing colleges from offering overpriced credentials.
Policymakers should be aware that the total loan limits in the CCRA are not well aligned with students’ annual borrowing limits, and this could create confusion among students and seems somewhat arbitrary. They may want to consider aligning annual and total limits more with program length or consider some other metric to set total limits. Policymakers should also be aware that the CCRA will create many different loan limits, far more than under current policy.
Finally, policymakers may want to consider the equity implications of the CCRA’s loan limits. The proposed limits would likely shift resources away from graduate borrowers and reallocate them toward undergraduate borrowers. Because individuals with only undergraduate degrees tend to earn less than those with graduate degrees, this suggests that the CCRA’s loan limit changes would distribute federal benefits from higher-income individuals to those with low and middle incomes.
