White House Suggests Capping Student Loans to Combat the Student Debt Crisis

The proposal suggests setting borrowing limits for grad students and parents would encourage universities to lower their tuition.

The White House released proposals to reform higher education in the United States Monday, including limits on grad student and parent loans meant to encourage universities to lower their tuition.

U.S. student loan debt, which reached nearly $1.5 trillion last year, has become a national epidemic as the cost of higher education continues to rise.

In a list of education priorities targeting reforms to the Higher Education Act, the White House said Congress should “institute Parent and Grad PLUS loan limits” to “encourage responsible borrowing.”

“Research shows a correlation between the availability of Federal student aid and tuition increases,” reads the proposal document. “The current system provides institutions of higher education with few incentives to control costs and saddles parents and graduate students with debt with little attention to borrowers' likely ability to repay.”

The report did not state what the limit should be. Current programs allow students and parents to borrow up to the cost of attendance, Bloomberg Government reports.

The White House also suggested simplifying student loan repayment by consolidating the five current income-driven repayment options into one plan, capping monthly payment at 12.5% of the borrower's
discretionary income.

Finally, the White House proposed expanding the loan forgiveness program to all undergraduate students who complete 180 months of repayment through an income-driven plan. According to the report, this would “eliminate the biases and administrative complications of the ‘Public Service Loan Forgiveness’ program.”

President Donald Trump already suggested eliminating this program in his 2020 federal budget, where he also proposed cutting subsidized loans.