Can the Trump administration make college cheaper?

protection for we the people. Today, the NPR network proudly upholds your first

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protect together. Power a truly independent press. Support the NPR network at plus.npr.org. The Trump administration is taking a new approach to a very sticky problem in the United States, that of student loan debt. All nearly 1.7 trillion dollars of it. The Department of Education has a plan to bring down

tuition costs beginning today. July 1st, what is that plan? Well, education secretary, Linda McMahon recently described it to lawmakers at a committee hearing on Capitol Hill. We want to bring down the cost of education. Yeah, so far. So good following that. Then, she describes this big change to the federal program that loan students money for school.

We've put in caps on programs for graduate students and undergraduate students to make sure that we can help reduce the cost and the burden of

college. Yeah, actually hold there for a second because that that is the

“confusing bit for me. I believe she said to quote, help reduce the burden of”

college. The plan is to give less money to student borrowers. And that's where I, I was really intrigued by their logic. This is Corey Turner, covers education for NPR. Every time I run into Corey at the like NPR coffee machine, he will tell me something about some new thing happening in education. And then months later, the thing has exploded into a front page story. And that is why I

listened to Corey recently when he told me to go check out Secretary McMann's tuition fighting plan. So that plan, basically, is starting July 1st. If you want to get a graduate degree in most fields, the Department of Education, the biggest lender for student loans, is saying that they're only going to give you about $21,000 a year. That is the cap. If you're tuition costs more than that,

well, sorry, the Ed department is not lending extra to cover it. The administration's logic is based on this sort of old idea. And that is that if there's a lot of federal student aid floating around in the higher education marketplace, colleges have no incentive to lower their prices. And so if they cap federal student loans specifically for graduate students, then the hope is

colleges and universities all over the country will have no choice but to then lower their prices. I have many follow-up questions. Yeah, so it sounds logical. The question is, is it actually true? Hello and welcome to Planet

“Money. I'm Kenny Malone and I'm Corey Turner and Corey, I believe you have now”

called basically anyone who has had a hand in trying to study whether or not

this proposal stands a chance to work. That's right. Today on the show, Corey tells us what he's found and tells us the roots of this less money, less tuition problems is that they're calling it lower loans, lower prices. I don't know. It might need to work chopped. Whatever the name of this is, the roots of this particular solution.

There have been some fantastic movies released this year and we know you can't see them all. So we're recommending some great films that might have flown under the radar to add to your watch list. Listen to pop culture happy-hour by the NPR app or wherever you get your podcasts. This week on Wayway, John Telly, we talked to best selling author, Carrow, Claire Burke

about how it feels to write the hip-book of the summer. I've been very dissociative, so that's a problem for my future therapist. Yeah, I say let's talk about the fact you're not in therapy. That's fast. Don't miss our full conversation in the rest of our games. Listen to the wait wait don't tell me podcast in the NPR app or wherever you get your podcasts. So we're gonna bring college prices down. That's

what we're about to do today. Yeah, I'm excited. College prices look out. You're going down. Today we have invited NPR's Corey Turner over to our planet money house because big things that may affect you that may affect your kids, your higher-ed dreams, they are happening. There's a consensus that there's a problem with the size of federal student loan debt in America. The question is how do we

fix the problem moving forward? Give less money. Give less money out. That is their proposal. And so I may I ask before we address that is the problem that

expensive. Oh, why would you ask such a Gordian? Not of a question. I see, okay.

“For the rest of the episode, we will try to untie that not to understand what”

problem the Trump Department of Education is trying to fix specifically. Why they think less money is the right approach and simply will it all work? But

first, something we must address. The administration's plan, the change is

going into place today. I mean, they will affect some loans for undergrads through a program that lets parents borrow for their kids. But really, what we're talking about here, the huge change is not about undergrad. It's all about grad school and like what? Well, prepared to have your mind blown. So here's the weird thing. So the cost of undergraduate college is not rising. What? The

net price of undergraduate for your programs has been stagnant for roughly 10 years. Why Corey then? Whenever I run like, I know calculations for how much

I'm supposed to save for my very young children for college. It's like, oh, you

might need millions of dollars. Why are people telling me that? Well, so there is a cosmic difference between sticker price and net price. God, it's got a sticker price is what people actually, exactly. sticker price has been rising steadily for a long time. Okay, send all your emails to Corey. But college net cost has not risen nearly as much as you may. Undergraduate college net

cost net net, not sticker net has not budged much. Corey says schools advertise eye popping tuition rates, but after financial aid and scholarships, the amount that families actually end up paying for undergrad really has not been changing. That may be different if you're wealthy and you're not getting financial aid. But generally, yeah, grad school is the place where net tuition has really

ballooned out of control. That's exactly right. Whenever people like me talk about the 1.7 trillion dollar federal student loan portfolio, a huge chunk of that is actually grad school debt. It's fewer borrowers than undergraduate borrowers, but the debt itself so much of it is actually graduate school debt. Okay, well, let's fix that problem. Sorry. Here we go. All right. So the Trump administration's

fix for this problem of ballooning grad school tuition, their idea of capping

“how much students can borrow. It's important to understand that it is just the”

latest move in what's been a decades long back and forth over how much to loan students. So caps on how much grad students could borrow from the government were

first imposed back in the late 60s. Then 20 years ago, in 2006, the Department of

Education swung the other way and started offering unlimited loans, which lasted until today. And now, the Department of Ed is dismantling that unlimited loan program. And we're going back to caps. These new caps are just shy of $21,000 per year for most kinds of grad programs. For more expensive programs like medicine and law school, there is a higher cap. And this idea that caps on student borrowing

could actually bring down the cost of tuition, it's been around for a long time. Corey told me at the old coffee machine, I believe that Linda McMahon's Department of Ed, they did not invent this theory, this idea. Where does the story of this idea

“begin? Funny you should ask, Kenny, it begins. It's a February 18th, 1987. I didn't”

expect to specific date. I will say, okay, go on. I'm checking. No, actually, I don't know what the weather was on February 18th, 1987. But in what city? New York. Because here, let me look at it. I will say, generally, drizzly and hazy in New York City. Okay, on that day, yes. Okay. On that date was published an opinion piece by the New York Times written by Linda McMahon's equivalent, the education secretary under then president

Ronald Reagan. All right. And this opinion. Ronald Reagan's Linda McMahon. Yes, exactly. William Bennett, Bill Bennett. And the opinion piece, the title says it all, he called it our greedy colleges. All right. Okay. Do we have this op-ed? Yeah, we do. Okay, let's hear. Let's pull this up and just see. Okay. Quote. Many of our colleges are added again. They have begun to unveil tuition increases that far outstrip the inflation rate. Next year, tuition is expected

and universities blively to raise their tuition's confident that federal loan subsidies would help

cushion the increase. Okay. We should pause there. So that's the whole argument. Yeah. And in fact, this idea really took hold and economists dubbed it the Bennett hypothesis. Okay. Now, I will say this does not sound on its face preposterous to me. No, no, I don't think it does either. Yeah. So where my brain goes immediately is we cover the federal reserve. They are responsible for keeping inflation at around 2%. And when they are worried about prices increasing across the

economy, what do they do? Well, they make it harder to borrow money. And so I don't know,

is the DOE to some degree not sort of running monetary policy for one product essentially,

which is college? And so if they make it harder to borrow money, would that not be the way to fight inflation? Well, Kenny, I will leave the monetary policy to you. But I will say it sounds

“logical. And I think that's why the Bennett hypothesis persists to this day as a kind of popular”

idea. The question is, is it actually true? Right. When the Bennett hypothesis was hypothesized, it was exactly that and untested assumption. Yeah. There was no real way to test it until 2006 because that's when lawmakers decided to really kind of do the opposite of what Bennett was saying.

They decided to grad students needed more money, you know, not just for tuition, but for things

like rent and food and books, a laptop while they pursued their degrees. So it was exactly 20 years ago today that they enacted the grad plus loan program, which was the program that allowed unlimited borrowing for tuition plus all that other stuff. And that move, even though it was, again, likely the opposite of what Bennett had in mind, it allowed us to test the Bennett hypothesis. Right. It provided exactly the kind of data that you would need to study, whether easy

access to unprecedented amounts of student loans would indeed result in how to Bennett put it. Yes, quote, "Colleges and universities blively, raising two wishes to stop up more and more of the money." Which is why I ended up calling about half a dozen, economists and higher education experts.

“Corey had a simple question for all these experts. Is that theory bunk or not?”

I mean, what do we know for sure at this point about the Bennett hypothesis? So I poured over these studies by lots of different researchers over the past 20 years about how grad plus affected students. I'm going to start with the study that everybody I talked to told me I needed to start with that is most often cited by Republicans when they say, "No, really, this will work." Okay. So this research was done in Texas and it was specifically

focused on the creation of the grad plus program in 2006 where graduate school borrowers suddenly went from having capped loans to essentially being able to borrow as much money to cover tuition and fees as they needed. So what was the effect of that easy federal money? Well, Corey got on Zoom and shattered with one of the authors of that study. His name is Jeff Denning and my economists and the professor at the University of Texas had Austin. So what Denning said

was they specifically wanted to look at when borrowers were suddenly able to take out a lot more in loans from the federal government, what effect did that have on college's prices in Texas? Did it increase the price that colleges were charging for their graduate programs?

“It's like the perfect natural experiment if you want to test the bened hypothesis.”

It is the perfect natural experiment. So Denning and his colleagues poured through tons of administrative data from graduate programs all over Texas and they looked at student-level details like enrollment, graduation rates, financial aid and what they found is really interesting. And the short answer is that we found that the price did go up. Was it was it like meaningfully up? Yes. Like how would you characterize it?

Meaningfully up. I would say a meaningful increase in the price. Denning told me that for every additional

64 cents. Two thirds of a dollar something like that. And Denning and his colleagues say that this is a

causal relationship that their study found because the students could borrow more. Many schools were

“indeed charging more. That's what that study found. So just in Texas, just in Texas. But meaningfully”

meaning freezes. Okay. So great bened hypothesis true. Problem solved. Not so fast, Kenny. Yes. Yes. I suspect there's more. So I also reached out to another researcher. But lots of folks told me I need to talk to if I'm digging into the bened hypothesis. And his name is Robert Kelchin. I'm a professor of higher education at the University of Tennessee, Knoxville. So unlike Denning and his colleagues on the Texas study, Kelchin rather than studying a state or an area,

he focused in specifically on different fields of study. I did research looking at business medical and law schools across the country. So what was the impact of limitless borrowing on traditionally pretty expensive graduate school programs? And what he found? I did not find evidence.

“Quote. I did not find evidence of the bened hypothesis. Meaning no evidence that there's a”

direct connection between student loans and tuition prices. There's some evidence in favor. Particularly at four graphic colleges. But he says it's based on a kind of cynical understanding of graduate school. Basically that the bened hypothesis is a logical conclusion if you're only looking at certain types of schools. It's a logical conclusion if you think that these graduate programs are massive profit centers. And some programs fields like business can be quite profitable.

But other fields for example medical school is wildly unprofitable. And Kelchin's point is there a lot of graduate fields of study that aren't that profitable because they are so expensive for

the schools to offer. It can take a million dollars of resources to produce one medical degree.

So limiting borrowing is not going to reduce that cost. You know, the labs, all of the different services they have to provide to students. And you can imagine the schools are operating on a relatively thin margin. Even if we assume that institutions raised prices when those became available, it doesn't mean that they have to space to move in the opposite direction. Part of what Kelchin is saying is the reason these programs are expensive for students is

they're expensive for the schools. So it's not so easy for them to cut prices. It's not that they're hugely inflated. I mean, some are. But not all of them. So we've got some serious mixed evidence about whether the bened hypothesis could work nevertheless this massive and sudden experiment is going forward. Today, the day we are publishing this episode. And so the people going to grad school this fall are already scrambling to make it work.

We've got more on what the research says about how they're most likely to react after the break. The fatal shooting of a teenager at a protest in Seattle has gone unsolved for six years. This is open in your face to how are there no answers. Our investigation has uncovered new

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Not once. Listen to Weakeep Us Safe. A new true crime series on the embedded podcast from NPR. For three weeks in 2020, part of my Seattle neighborhood was taken over by a protest occupation. We were here to protest police brutality. But it ended in tragedy. The whole space felt darker and angry. Join me as I investigate the unsolved killing of 16-year-old Antonio Maze Jr. Listen to Weakeep Us Safe on the embedded podcast from NPR.

“Hi, it's me, Peter Segal, host of Weightweight Don't Tell Me. It's summer, and if you want to”

turn your pool party into a nerd fest, check out our news quiz. We got comedians, we got celebrities, we got games to help you laugh about the week's news. Yeah, that news. It'll be just like, we're all hanging out at your backyard barbecue. Listen every week, the way we don't tell me on the NPR app or wherever you get your podcasts. Okay, so mixed conclusions on weather and when the abandoned hypothesis is correct,

meaning the evidence linking how much people can borrow to how much grad school's charge for tuition

Trump administration plan, which restores the idea of loan caps from 20 years ago.

And actually, the loans end up being even more limited than before, because they don't take 20 years of inflation into account. So, so we ask Corey, like, how do the people you talked to think this move is going to play out? So, I talked to Preston Cooper at the conservative leaning American Enterprise Institute. So, I think, you know, going forward,

“it's important to remember that the new loan limits are still relatively high and that actually,”

most students are already borrowing within the new loan limits. These new loan caps are probably only going to affect about 30% of grad school borrowers, because the vast majority of folks Cooper says are right now borrowing within the new loan limits. Oh, that's interesting. Yeah,

and his point is that the point of these new loan caps is basically to put downward tuition

pressure on some of the most expensive schools out there, including, by the way, some pretty elite name brand schools. One analysis from the peer center found that the two schools at the top of this list with the most affected borrowers are NYU and USC. If students don't go to that absurdly priced university and instead choose a more reasonably priced institution for the same basic degree path, that creates a lot of pressure on the high priced institutions to actually

“do something to lower their prices. He's put together some fascinating scatter plots that show, say,”

like, a master's in social work and all of the programs in the United States that offer a master's in social work. And you can see he maps where the new loan limits are and the vast majority programs fall within the limits. But then there are some quite well-known and respected schools who for one reason or another are charging two or three times as much for the same degree that you could get at a public university next door. So, yes, I don't want to promise that in the

first year where everybody's going to slash their costs and, you know, it's going to be great,

but I do think that this is going to create, you know, some pressure over time, whether that's through students choosing cheaper institutions or through institutions realizing that they can't just raise the price every year and pass it along to students through the federal loan program. This is going to create some real pressure across control in the medium run. So, in the next couple of years, the Bennett hypothesis could maybe lower tuition. Sometimes, at some places, the experts

I talk to pretty much agreed on that. Robert Kelchin at the University of Tennessee, he told me he expects to see at most a small decrease in tuition. Students may become a bit more price sensitive shop institution is a little bit more. And then Jeff Denning, who was one of the researchers on that Texas study, again, that is most often used by Republicans to justify this move. He told me, "It's possible. We'll see price cuts." It's not out of the realm of possibilities

that prices would reduce. And the handful of schools have already said in response to this new program, they're going to lower their prices because they know students can't borrow as much.

“There will be less federal aid available. But the question is, how will the private market respond?”

How will students respond? You know, I don't have a crystal ball. I wish I did. So, no one has a true crystal ball as to how much if at all these caps will bring down the price of grad school. But Corey, how do we think students will respond to this? Do we know that? So, one of the folks I talk to is another friend of the show, friend of my be a regular Corey Turner country, a regular Corey Turner contributor. Her name is Dominique Baker, she's an associate

professor of education and public policy at the University of Delaware. And she told me that there's really robust evidence around what happens when you cut financial aid for students. And she said, one of the things that most often happens is people just stop and rolling. When you cap financial aid like a student loan, but don't provide some commensurate type of grant or scholarship to help, the number one thing that happens is that students stop going to college.

And that is consistent across the research literature. And Baker says, though, we're not sure. That's likely going to be true for grad students too. They're either going to leave school or turn to a private lender to try to get a loan. And Robert Kelschen was also telling me, students are scrambling right now to figure out how to pay for school this year. Can they find money other own? Can they go to the

to attend if they have to find money from the source of it and the federal government.

So, you've got lower income borrowers. What are they going to do? I mean, you could say, well, they'll go to the private student loan market, but the private student loan market is not what it

“used to be. And that's because it used to be a key source of borrowing for students. Lots of people”

leaned on it, but when federal grad loans became unlimited 20 years ago, there was this mass Exodus out of private loans into the federal system. So, there was little reason for students to take out private loans. And so, the private industry shrank. And now, it could be way harder to

get a private loan if you're a lower income borrower with, you know, let's just say a short

credit history or maybe a suboptimal credit history. You might not be able to get a private loan. Well, let me if I put my sort of ruthless economic theory hat on here. That is what it looks like when demand for a product drops, right? It's fewer people in rolling means fewer people are asking for a college degree or in this case, a graduate degree. And in theory, is that not the signal that is meant to be sent to these grad programs? You're too expensive. People are not going to

enroll? Yeah, I think there's some truth to that Kenny. And I also think that's not a bad message

to send to some of these schools. I think it's reasonable to tell those schools we're going to make

this money harder to come by for borrowers because we don't think you're giving them a good return on their investment, right? And since they're borrowing taxpayer dollars, you know, the message these schools is, we're done. We're not going to lend unlimited money. I guess the cool thing

“about this particular message to send is that you must use people who want to degree as the messenger,”

not that I have a better way to send the message. Well, I don't, yeah, I don't know if this metaphor is apt. But the way I, my brain keeps thinking of it is as a game of chicken. I feel like the Trump administration is playing chicken with schools. The game of chicken is the administration saying, get your prices down or else we're not going to use taxpayer backed loans to send people to your program. Get your prices down or we're going to make it so that you have a hard

time filling your enrollment. And the trick there is that it's really the borrowers who are the ones having to make those hard choices. Does anybody have a better idea for how to get grad school costs down? No. Yeah. I mean, well, they're one, one proposal I've heard from folks is like,

“make the lending program more supple. You know, lend borrowers, what is appropriate for their field”

of study, okay? And one of the things the department is also doing, which Republicans created in their one big, beautiful bill is they're implementing a brand new, what's called a do-know harm provision, where all college programs are going to be evaluated on the return on investment to their borrowers. So like, if a college program, if it's graduates, don't end up earning more than a high school graduate who didn't go to college. That college program is going to lose access to federal

loans entirely. Entirely. Entirely. So just, I don't even call that a cap. I call it a death sentence. Right. Right. Well, I suppose some might say that that is a pretty severe incentive to make sure there's a return on your degree. Yeah. All right, Corey Turner. Thank you very much. Can him alone? I appreciate you asking me on. By the way, there are a bunch of student loan changes happening today. July 1st. It's not just this big giant one. Corey has a big digital story on the NPR website

with a choose your own adventure component. Uh, so I recommend playing it through multiple times. Choose all of the adventures. Corey is also over on our sibling podcast, the indicator, talking about all of those changes. And while you're at it, help us put the planet in planet money summer school. Please give us a tip of some economic success from somewhere outside the USA that the rest of the world should know about. Maybe it's a different way to do home loans or a story

about job creation that actually worked. Email us at [email protected] and put summer school in the subject line. This episode was produced by Willa Ruben and edited by Marian McCune. It was

executive producer, special hat tip to friend of the show, Corinne. I'm Corey Turner. I'm Kenny Malone.

This is NPR. Thanks for listening.

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