After years of political fights over excessive student loan debt, there is a new, surprising twist. Twenty-five states with a Democrat governor and the District of Columbia are suing the Trump administration to allow students to take on more student loan debt. What’s going on?
As background, last year’s reconciliation bill made a host of beneficial changes to student loans, and one of the most important changes was phasing out the Grad PLUS student loan program. Graduate students (e.g., those pursuing a master’s or doctoral degree) can already borrow up to $20,500 per year from the main (Stafford) student loan program, and that remains unchanged. But Grad PLUS was implemented in 2006-07 to allow graduate students to borrow up to whatever their college decided was appropriate. It should not come as a surprise that colleges exploited the program to raise tuition, leaving colleges richer and students with more debt.
Ending Grad PLUS was the right move.
But there was a problem. While the remaining limit of $20,500 per year is enough for most graduate programs, there are some, like medical school, where providing the education is very costly, and students should arguably have access to higher loan limits. The legislation therefore increased the $20,500 limit to $50,000 for “professional” programs, pointing to a definition of “professional” in previous regulations. Unfortunately, the regulatory definition was not definitive. I happened to sit on the committee tasked with determining which programs are eligible for the higher loan limits based on the ”statute, congressional intent, and ambiguous regulatory text.” The committee used the existing examples already in regulatory text (law, medicine, dentistry, etc.) and then included any other fields that were similar, with clinical psychology being the only field that was sufficiently similar to warrant adding to the list.
This distinction came to a head with nurses. While undergraduate nurses are completely unaffected, students attending graduate nursing programs are now limited to $20,500 per year in debt. Colleges with nursing programs want them to take on more debt so they can charge more, and therefore want these programs to be classified as professional, which would then allow students to take on $50,000 of debt per year.
This is a terrible deal for the nurses in graduate programs. The PR message is that the Trump administration is disrespecting nurses by failing to classify them as professional. This is wrong for two reasons.
First, it is a misreading of what professional means in this context. The professional distinction was for decades merely a categorization tool for the Department of Education with no practical effect on students or colleges. This obscure definition matters now only because it determines how much debt students can take on. It was never designed to be, nor was it ever considered the government’s official determination of which professions are considered professional in an everyday context. For instance, no undergraduate program is categorized as professional, but that clearly doesn’t mean that accountants, teachers, and nurses are not professionals in the everyday sense of the word.
Second, if this lawsuit succeeds, it would be a Pyrrhic victory. The only practical impact would be to load up nurses and other graduate students with more student loan debt. Being categorized as professional in a government database isn’t worth an extra $29,500 per year in student loan debt.