Can Private Lenders Fill The Student Loan Gap? College Presidents Say No.

The Republican strategy for reining in the ever-climbing cost of college rests on a simple concept: Tuition keeps increasing because it’s too easy for people to take on more and more federal student debt.

How the GOP is acting on that view in practice may be creating new obstacles for swaths of working- and middle-income people.

Republicans have long argued that government programs that let students borrow as much as they need to complete their degrees, rather than a fixed amount, have given universities an excuse to jack up prices.

"There is some suspicion that institutions are raising their tuition precisely because they know borrowing can be so easy. So we’re trying to put a little break on that," said Sen. Bill Cassidy (R-La.), chair of the Senate education committee.

Now, guided by last year’s sweeping domestic policy law, the Trump administration is limiting how much government support students can get for professional and graduate degrees — while counting on private lenders to bridge financial gaps.

But college presidents fear the lending limits will make many advanced degrees a luxury only available to wealthy students. Low-income students may have to turn down acceptance offers because they cannot borrow enough money and don’t have strong enough credit or a co-signer for a private loan.

“These aren't privileged students,” said Rhett Brown, president of Wingate University in Wingate, North Carolina, which offers a significant number of medical programs that would be affected by the change. “They just don't have the family resources to get them there.”

The Trump administration plans to cap professional and graduate student loans at $200,000 and $100,000, respectively, starting in July — limits mandated by the One Big Beautiful Bill Act.

The law also established a new lifetime limit for all student loans of $257,500. So low-income students who use their loans to pay for cost of living expenses during their undergraduate education are likely to reach that lifetime cap sooner. That forces them to turn to the private sector, which might not loan them more money.

The Education Department has also limited the professional designation to 11 fields — a move that received immediate pushback from colleges and professional association groups, particularly in the health care field. These groups say the caps aren’t enough to offset the costs of running these programs, especially at smaller private schools that heavily rely on tuition for their revenue.

Brown said about 68 percent of Wingate’s students in graduate physician assistant, physical therapy and occupational therapy programs have loans exceeding the proposed caps. Students who take out loans before July won’t be subject to the caps. But it's the incoming fall class he worries about.

“The federal [loan] program is that bridge for a lower-income student who is talented and wants to work in a health care profession,” Brown said.

Wingate is one of the more than 1,545 private, nonprofit colleges and universities that enroll millions of students across the country and represent more than a quarter of all U.S. schools, according to the Integrated Postsecondary Education Data System, which tracks data like enrollment and graduation rates at higher education institutions. These schools are more dependent on tuition revenue than their public university counterparts that receive funding from their state governments.

Tuition at these private, nonprofit schools essentially flatlined in the 2024-25 academic year, with a half a percent decrease compared to the previous year. But the cost of food and housing for students living off campus rose 7 percent.

Republicans say students who need to borrow more than the new caps allow can turn to private lenders.

“I think it's a good thing to go to private lending,” said Rep. Tim Walberg (R-Mich.), chair of the House Education and Workforce Committee. “I’ve felt it's been bad for education ever since we forced ourselves into federal loans.”

Private lenders say they’re ready to step in.

Anthony Noto, CEO of SoFi, announced in January that the online bank launched new private student loans options to address “the gaps left by the federal graduate programs.”

Jon Witter, CEO of Sallie Mae, a private lender with a focus on student loans, said on an earnings call in January that he expects the number of private loans it makes in 2026 to increase up to 14 percent, compared to the previous year.

But college leaders haven’t been reassured by direct conversations with private lenders or these types of announcements.

Some banks are reluctant to lend to students with lower credit scores or no credit history — even after taking future earning potential into account. About 38 percent of graduate students don’t have a high enough credit score to qualify with most lenders, according to a December report from the Federal Reserve Bank of Philadelphia, which analyzed a sample of 66,000 students who first enrolled in a graduate program during 2015–24.

“They all say, ‘Oh, yeah, of course, we will do our best, and we'll come up with amazing packages for them,’” said Tarek Sobh, president of Lawrence Technological University in Michigan, which offers advanced degrees in engineering, health sciences and other areas of study that will be affected by the caps. “If somebody is coming without a dime to his name and a credit score of 300, do you think they’re going to give them a loan? That’s not going to happen.”

Cassidy said there are other avenues students can take to pay for their education before turning to the private market — like applying for scholarships or enlisting in the Army.

“So really, there are other options should this be too much for them,” he said.

When Walberg was asked if he was concerned that lower-income students may not qualify for a private loan, he said it's all a matter of picking the right program.

“If they’re going to the right programs, then these banks and lending institutions know they’ll be able to pay back their loans,” he said.

Ken Ruggiero, CEO of student loan lender Ascent, told POLITICO he has been meeting with schools to figure out how his company can responsibly lend to students in that 38 percent. His company has responded to more than 70 requests from graduate schools to propose loan alternatives and has come up with options that would allow schools to share the risk related to students who may struggle to repay their loans, including colleges making upfront financial contributions or having less money disbursed to them.

But so far, the schools he’s talked to haven’t been excited about these ideas. It's a stark departure from Grad PLUS, a federal loan program that began in 2006 and let students borrow up to the cost of attendance. The GOP law mandates that program be sunset for new borrowers, which the Trump administration is doing this summer.

“Since 2006 they set the tuition, they recruited students and they got all their money — they got full cost of attendance,” Ruggiero said. “Right now we're trying to educate them that you're not going to get the full cost of attendance for a substantial portion of your accepted and enrolled students, and they're struggling, quite honestly.”

When asked if it was the Education Department’s intent for colleges to turn to private lending, spokesperson Ellen Keast said the Trump administration’s focus is on “reining in the out-of-control student loan borrowing.”

“If colleges and universities want to remain competitive, we expect them to lower tuition, deliver programs that prepare students for the workforce, and make higher education more affordable for families,” Keast said in a statement.

White House spokesperson Liz Huston echoed that sentiment, adding that the main reason colleges support higher caps is because “it allows for massive budgets and wasteful spending while students are left to foot the bill.”

But the loan caps will likely not actually have the intended result of a broad decline in tuition costs, college presidents and analysts say.

Colleges and universities may reassess tuition, but schools with a significant portion of students in affected programs may see enrollment declines, leading to potential budget cuts, according to a report from Moody’s, a credit rating agency.

Sobh said that lowering tuition is not as simple as Education Department officials might think. Medical and engineering programs, like the ones his school offers, are expensive to run because the necessary facilities and faculty are costly. He also said there are nontuition expenses like food and housing.

Both government and private sector data bear this out. The Moody’s report noted that out of the $115,000 median cost of attendance across a sample of full-time, prestigious MBA degree programs in the five largest metropolitan areas, about $79,000 is tuition and the other $36,000 goes toward housing, health insurance and other costs.

“If [the current caps] stand, my guess is that many of these professional programs are going to be for the rich people who can actually afford it without getting a loan,” Sobh said.