If paying for a university is a buffet – imagine students and their families browsing for various help – one item may quickly fall off the menu.
Congressional Republicans are making progress towards budget adjustments that could close the federal direct plus loan program (in addition to cutting back on other sectors). In this process, the House and Senate are University cost reduction methods (CCRA). This includes removing this type of student loan for parents of graduate and undergraduate students.
However, some experts say that the Congressional Committee (the next step in the settlement) currently seeking budget cuts may be looking for the wrong place.
“This is one of the only parts of our profit-making (federal loan) portfolio. It says a lot about why (IT) is used as something like (political) football,” says Ombudsman Julia Bernard, Consumer Financial Protection Bureau (CFPB) Student Loans. “And everyone knows that in any part of the portfolio, if the government immediately returns to the Treasury, what some people may think of as a profit, they will use that money on other things we probably care about as a society.”
But in addition to federal revenue, shutting down the Plus Loan Program could impact higher education funding for years to come.
Why Federal Direct Plus Loans Are in Chopping Block
The CCRA, which won more than 150 Republican Republicans during the final session of Congress, is not the latest attempt to shutter the Plus Loan program. In January, the Senate introduced it Graduate school opportunities and affordable loan methods For the same purpose.
Related: Federal Student Loan Law Tracker
The question is, why cast such a bright spotlight on Plus Loan?
Conservative lawmakers have an accountability argument: If Congress limits federal loan borrowing, universities will have to compete for students, and will not be able to raise tuition fees that will turn overwhelming costs into taxpayers.
If that doesn’t happen, or until it happens, the parents of graduate and undergraduate students may flock to the private lender as alternative sources of funding. The former education department under Secretary James Kvar says he is not excited by the outcome, but he also advocates for more responsible federal loans.
Holding schools that aren’t surprising are against shutting down federal funding firefighters could be a place for responsibility for a bipartisan agreement.
“We see people getting loans to get degrees that are never intended to lead to high-paying jobs. It could be seminary or drama schools, and programs may not be very good on a daily basis,” says Kvaal. “So we need to have a real conversation about when loans are appropriate for graduate school and when those schools are intended to provide ROI for students.”
Related: Demolating the education sector doesn’t modify the way Americans pay the university
The impact of cancellation of three direct plus loan programs
1. A more qualified borrower who relies on private student loans
Considering America’s education debt as 10 slices, eight slices are federal loans, and two are private. Remove the plus loan and the ratio will definitely change.
Don’t expect discussions from banks, credit unions, or online lenders.
“This has been on the wish list of private student loan companies for over a decade,” says Bernard of CFPB. “Before we were (plus loans), private student loan companies were able to offer graduate students a much bigger loan. Of course, as everyone can imagine. Graduate students are more likely to earn a higher income. So it’s a population where the private student loan market is very interested. ”
Related: CFPB Ombudsman’s message to federal student loan borrowers: “You are legally entitled” “Request”
If you (as an undergraduate student or parent) or your potential co-signer has strong credit and income, relying on private student loans may not be such a problem.
| Loan type | 2024-25 Interest rate | commission |
| Federal Direct Alumni and Loans | 9.08% | 4.228% |
| Private Graduate Student Loan | 3.47% to 14.83%* | It depends on the lender |
| Federal Direct Parents and Loans | 9.08% | 4.228% |
|
Private student loans for parents |
3.39% to 17.99* | It depends on the lender |
| *Prices advertised by bankrate partner lenders as of April 2025 | ||
“When I was working for the Financial Aid Bureau like I did 15 years ago, the (parent) plus loan interest rate was at 7%,” says Colleen Campbell, former executive director of the Department of Education’s Loan Portfolio Management Bureau. “So, it’s like, ‘Do you get a home equity credit line or a plus loan?” The current challenge is that (plus) programs really seem tenuous to people, as we are inflation or (here) interest rates are like in the case of federal student loans. ”
2. Less eligible borrowers facing high private loan fees (if they are approved at all)
The problem with removing slices of PIE federal loans is that they are the main options for reasons. They provide fixed interest rates and widespread repayment protection measures, on a large scale, to most credit-stage borrowers. In fact, FSAs only need to have no “adverse credit history” for plus loan applicants. This includes recent delinquency, defaults and bankruptcy. The minimum credit score is not mentioned.
“The plus loan credit standard is up to hundreds of thousands of dollars in loans to parents (and graduates) who have very low and very low incomes, similar to the mortgage jackpot before the Great Recession,” Campbell says.
In comparison, private student loans award competitive fees only to students with strong credit or more generally credible co-signers. It also features less protection than federal loans. Most notably, you cannot change your repayment plan as you wish, and you cannot require your lender (or loan servicer) to temporarily suspend your monthly membership fee.
Therefore, it is reasonable that the absence of a plus loan will drive more borrowers to a personal loan at various levels of risk. Applicants with low credit may face lower incomes with higher interest rates or, even worse, reject them.
Take it a step further. It is logical to assume that some graduate students and parents will also seek loans from meticulous lenders who intentionally relax eligibility criteria. There are many pitfalls to getting a student loan with poor credit.
“What I’ve learned from my 10+ years of CFPB job is that borrowers really sign a rather predatory contract to go to school,” says Bernard.
3. Students, families choosing low-cost schools
According to a report by the New York Times, colleges and universities are forecasting the biggest class of first year students next fall, but that trend could soon turn around.
After all, if students and their families are locked out of private student loans – they may need to skip the four-year university of their choice, as interest rates and fees are too high or they cannot obtain approval for the loan.
Campbell expects the school to host a pressure campaign on elected officials serving districts and states. That happened around 10 years ago when the Obama administration tried to strengthen its plus loan eligibility criteria.
“So what I saw in 2013 is that high-cost universities, such as HBCU, registering many low-income individuals, especially in this situation, have had a strong response to all sorts of (enhanced) eligibility restrictions, so I think that’s the case again this time.”
The question then changes from whether the Plus Loan Program needs to be cancelled effectively to whether there is enough motivation to do so.
“This is really when the rubber hits the high-ed’s road,” adds Campbell. “Every senator has universities in the state, if not hundreds. Every representative of the legislature has a university or campus that employs people who bring money to the district.
What is your next step?
If you or your students are in the school or in their way, you may be worried about losing your higher education funding options. At least not to emphasize it yet. Congressional Republicans have yet to finalise their budget, so be sure to keep an eye out. Student Loan News Coverage.
In the long run, know that there are still many different options to cover your education costs (although attending a low-cost school is worth your consideration). To get a head start with these options, consider our guide How to pay for graduate school and How to pay to a university with no money.
