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Alexis Madrigal: Welcome to Forum. I’m Alexis Madrigal. Look—higher education has gotten too expensive. I think just about everyone agrees on that. And there are many fields where it’s highly unlikely that an expensive graduate education will make easy economic sense, like social work or journalism. The patchwork over this difficult situation has been an array of federal loan programs, which have now been scrambled and overhauled by the Trump administration.
Today, we’re going to talk about these reforms and other changes to the student loan landscape. We’re joined by Jordan Matsudaira, a professor and director of the Postsecondary Education and Economics Research Center at the School of Public Affairs at American University, and a former deputy undersecretary and chief economist at the Department of Education during the Biden administration. Welcome, Jordan.
Jordan Matsudaira: Hi, Alexis. Thanks for having me.
Alexis Madrigal: Great to have you. We also have Aissa Canchola Bañez, policy director at Protect Borrowers, an advocacy group focused on debt issues. Welcome.
Aissa Canchola Bañez: Thank you so much.
Alexis Madrigal: And we’ve got Jessica Blake, a policy reporter with Inside Higher Ed. Welcome, Jessica.
Jessica Blake: Thanks for having me.
Alexis Madrigal: Jessica, let’s start with you. There have been major changes to the federal student loan system brought about by Trump’s budget bill that passed last year. You’ve grouped them into three buckets: loans, Pell Grants, and “do no harm.” Can you give us an overview?
Jessica Blake: Sure. Last summer, on July 4th, the president signed into law the “One Big Beautiful Bill,” which included a range of changes. For higher ed, we’ve focused on three main areas.
First are loan caps. These limit how much graduate students can borrow, splitting them into two categories: professional and graduate students. Professional students can take out up to $50,000 a year, while graduate students can take out up to $20,500 a year. It’s up to the Department of Education to clarify which programs fall into each category.
Second is a new program called Workforce Pell. It expands the existing Pell Grant system—traditionally used for associate’s and bachelor’s degrees—to cover short-term job training programs. For example, certificate programs at community colleges tied to high-demand careers may now qualify, depending on Department of Education rules.
Finally, there’s a new accountability measure called “do no harm.” It compares graduates’ average earnings to those of high school diploma holders in the same state. If a program fails that test in two out of three years, it could lose access to federal student loans. So, there are a lot of significant changes.
Alexis Madrigal: Jordan, what do you think?
Jordan Matsudaira: I’ll pick up where Jessica left off. There are a lot of changes coming, but the biggest—and likely most impactful—are the loan limits for graduate students.
To give a sense of scale, the federal government has been lending about $35 billion a year in recent years, and roughly a third of that will now be capped. That means many graduate students will face sizable funding gaps. These are major changes, with a lot of moving parts, and I think it’s going to be a bumpy transition when the limits take effect in July.
Alexis Madrigal: Do these caps make sense in general? Without them, do graduate schools have too much freedom to raise tuition?
Jordan Matsudaira: It’s a good question. Among higher education policy experts, there’s been growing concern about graduate borrowing. Graduate loans now make up nearly half of all federal loan dollars, even though graduate students are only about 20% of the student population. Six-figure loan balances are becoming more common.
There’s also concern that the Graduate PLUS program, created in 2007, allowed students to borrow up to the full cost of attendance, which may have reduced pressure on institutions to keep tuition in check. The evidence on that is still somewhat limited, but the concern is real.
At the same time, many people support some form of loan limits to protect borrowers from taking on unsustainable debt and to reduce taxpayer risk. The issue is that these particular limits are relatively strict compared to current borrowing levels. That raises concerns about whether they could go too far—potentially limiting access to high-return programs that help with economic mobility.
Alexis Madrigal: Stepping back, how big a departure are these policies from the Biden administration’s approach?
Jordan Matsudaira: In some ways, they’re a significant shift. The Trump administration’s changes—like stricter loan limits and less generous repayment plans—move in a more conservative direction, emphasizing repayment over relief.
That said, some ideas, like loan limits, were discussed during the Biden administration as well. So in certain areas, it’s more a difference of degree than a completely new direction.
Alexis Madrigal: Aissa, your organization focuses on borrowers. With these caps, it seems likely the private lending market will step in. Does that concern you?
Aissa Canchola Bañez: Yes, very much. Historically, the federal student loan system was designed to ensure that all students—regardless of background or family wealth—could access higher education.
The private loan market operates very differently. It’s driven by profit, not public access. Lenders base decisions on a borrower’s ability to repay, which depends on credit scores, financial background, and access to a cosigner.
We recently published research with the Century Foundation showing that about 40% of Americans would struggle to qualify for private student loans. That means higher-income students may still find financing, but lower-income students could be shut out—or pushed into riskier, more predatory options.
At the same time, the bill doesn’t do much to lower the cost of higher education or expand grant aid. So taken together, these changes are deeply concerning for many borrowers and students.
Alexis Madrigal: That’s Aissa Canchola Bañez, policy director at Protect Borrowers. We’re also joined by Jordan Matsudaira of American University and Jessica Blake of Inside Higher Ed.
We want to hear from you. Are you worried about these changes to student loan programs? Give us a call at 866-733-6786, or email forum@kqed.org. I’m Alexis Madrigal. Stay tuned.
