As Federal Student Lending Changes, Private Lenders Can Help Fill the Gap

WASHINGTON, D.C. - A new column by Jon Decker, executive director of American Commitment and senior fellow at the Parkview Institute, examines how recent changes to federal student lending are reshaping the higher education financing landscape. Following the elimination of Grad PLUS loans for new borrowers and the implementation of new federal borrowing limits for graduate students that took effect earlier this month, Decker outlines how private lending can help students bridge the gap where additional financing makes sense, while encouraging greater attention to the value and affordability of individual degree programs.

To read the full piece, click HERE or see below

Trump Turns Off The Spigot For Grad Schools

Jon Decker
Parkview Institute
July 29, 2026

Before President Trump's second term, both political parties seemed to think the solution to making higher education more affordable was throwing more money taxpayer money at the problem.

Unfortunately, that's had the exact opposite result of driving tuition even higher.

Colleges had no incentive to cut costs so long as taxpayer-backed loans guaranteed them customers, regardless of those students' ability to pay the bill. But with the passage of President Trump's One Big Beautiful Bill, we are already seeing long overdue changes coming to higher education, paving the way for more practical, private-sector alternatives and forcing a fundamental shift in the university business model itself.

Today's ballooning student-loan crisis is the predictable consequence of Democrats' decision to transform what was formerly a public-private lending system into a massive, centrally managed federal loan portfolio. It's easy to forget the nationalization of student lending was supposed to help pay for Obamacare, but the program quickly started accumulating losses instead.

According to the CBO, banks and other private lenders originated as much as 78 percent of federal student-loans as recently as 2008. This changed when, to fund Obamacare, Congressional Democrats terminated new Federal Family Education Loan Program originations and required that, beginning July 1, 2010, every new federal student loan be funded directly by the federal government through the U.S. Treasury.

As student lending shifted from the private sector to the government, debt ballooned. By 2024, federal loans accounted for 90 percent of the nation's $1.85 trillion in outstanding student loan debt, compared to a mere 10 percent held by the private sector. The message that reveals itself here is straightforward: the profit-disciplined private sector would never have allowed for the accumulation of so much bad debt in the first place, had it been left in the driver's seat.

As Milton Friedman famously quipped: "Nobody spends somebody else's money as carefully as he spends his own."

Biden made matters worse by freezing student loan repayments, which merely doubled down on the programs unaffordability by shifting ever greater cost burdens to the taxpayer. As a result of the prior administration's confused actions, repayment habits have further eroded, and millions of borrowers moved into delinquency and default when the federal government finally began recognizing missed payments again. As it currently stands, roughly a third of federal loan borrowers in repayment are in some form of delinquency.

Thankfully, because of President Trump's One Big Beautiful Bill, the government is finally taking baby steps towards re-privatizing student lending. This legislation capped the amount that graduate students could borrow at $20,500 annually, with a $100,000 lifetime limit. It also capped the amount that law school students could borrow at $50,000 annually with a $200,000 lifetime limit. Some schools immediately cut their tuition to the level of the federal loan limits.

For those students who still need more loans to obtain their desired degree, the private sector has jumped in to help. And private lending today looks far better than it did 15 years ago, when the market was still dictated by government, overly complicated, and challenged lenders' ability to underwrite and price for risk. Today, private lenders are helping borrowers bridge the gap by partnering with leading universities to issue loans where they make financial sense. Some universities are also creating their own in-house lending programs, with or without partnership from leading financial institutions.

Of course, there are still some college majors that likely won't have the same loan availability as they did under unlimited government subsidies. But that's the point. It is not sensible for every borrower in every major to take on six figures of student loan debt. If the market won't bear that, then it was foolish for the government to issue many of these loans in the first place. President Trump's solution is a much-needed improvement for taxpayers, the economy, and for borrowers themselves wishing to avoid unsustainable debt.

And promisingly, what had once seemed like endless increases in tuition tied to the endless government checks, is finally showing signs of slowing.