Could capping student loans actually force universities to lower tuition?
The Department of Education is implementing a new plan to cap graduate student loans. This video explores whether limiting available federal borrowing can effectively curb the rising costs of higher education.
The new policy, effective July 1st, aims to reduce the financial burden of school by limiting the amount the government is willing to lend to graduate students. This strategy relies on the 'Bennett Hypothesis,' an idea circulating in higher education circles for roughly 40 years.
The hypothesis suggests a direct link between the availability of student borrowing and the price of tuition. The theory posits that if the Department of Education—the nation's largest student loan provider—restricts loan amounts, institutions will be forced to lower their prices to remain accessible. While this idea was previously floated without evidence, the current administration's rollout provides a chance to test the theory against decades of data.
Source: Can the Trump administration make college cheaper? | Planet Money
