(The College Fix) — New federal limits on graduate loans are “foolish” and “harmful,” according to Minnesota Attorney General Keith Ellison. But his own state is implementing similar restrictions through its new loan program.
Minnesota is part of a multi-state lawsuit against the Department of Education for limiting graduate loans for certain degrees.
Effective July 1, graduate students can borrow $20,500 per year unless they are in a “professional” degree program, in which case they can borrow up to $50,000 per year. The Department of Education classified certain programs as “professional” such as medicine or dentistry.
“I have no idea why the Trump administration would unlawfully limit access to federal student loans for people studying to become physical therapists or physician assistants,” Ellison stated when Minnesota joined the lawsuit. He called the regulation “unlawful, foolish, and harmful.”
In late June, a judge gave a limited victory to challengers, requiring the Department of Education to reconsider how it classified degrees. The ruling did not remove the limits overall.
Regardless of how the legal challenges end, graduate students in Minnesota will have other options for paying for school.
The SELF Grad Loan offers two options, both with annual and maximum limits, just like the new federal regulations. The state also has a tiered system, allowing “Select Doctorate Programs” such as dentistry, medicine, pharmacy, and veterinary students to borrow more money.
The new federal program also offers higher limits for certain programs. The state and the federal government’s limits differ only in degree, not kind.
The state says the loans are not based on credit score. However, a minimum 670 FICO score, or co-signer, is needed to qualify.
The College Fix reached out to Minnesota’s Office of Higher Education for comment multiple times via email and phone over the last two weeks, asking what percentage of students would be left out due to the minimum credit score requirement on SELF loans and why the state is using similar limits to Trump while also suing to stop those caps.
No one responded, except to direct The Fix to a different email address. That did not yield any further comments.
Experts criticized Minnesota’s hypocrisy.
“Lots of people and states have criticized the Trump administration for eliminating GradPLUS,” Andrew Gillen, a research fellow at the Cato Institute, told The Fix over email. “But none of them have simply recreated GradPLUS loans.”
“This is an implicit admission that GradPLUS was not a well-designed loan program,” Gillen said, because “all of the replacements look very much like the new loans, with limits on how much students can borrow and, in this case, even more stringent credit rating and co-signer requirements.”
Even with limits from the federal and state governments on student loans caps, others argue Minnesota’s program offers too much money.
Preston Cooper, a research fellow at the American Enterprise Institute, told The Fix via email that “it’s good to see the program acknowledge the need for loan limits, but the caps the Minnesota program sets up are extremely high.”
Cooper said the SELF program “opens up the floodgates,” giving students the ability to borrow “too much for programs that don’t pay off.”
He pointed out that the $150,000 loan limit for most graduate programs is on top of the $100,000 limit at the federal level, leaving graduate students with the ability to borrow a quarter of a million dollars while in school.
Certain doctorate students could borrow nearly half a million dollars by combining both loan programs.
“Very few students can reasonably justify borrowing that much,” Cooper said, “but Minnesota’s program will make it easy to do so.”
Cooper told The Fix that “there are good reasons that Congress abolished Grad PLUS. The program contributed to tuition inflation and buried students in unpayable debt. If Minnesota isn’t careful, it may end up recreating the same problems.”
Gillen with the Cato Institute agreed.
He said “the main danger of any student loan program from the student side is borrowing too much,” especially in the case of Minnesota SELF loans because “most students would have already maxed out their federal loans.”
While Gillen said the SELF loan co-signers help eliminate some risk, they don’t totally eliminate the ultimate “danger for the lender” that “the loan might never be repaid.”
This article was originally published by The College Fix and reprinted here with permission.
Daisy Roser | The College Fix
College Fix contributor Daisy Roser is a student at Illinois Eastern Community Colleges.
