Overview of Can the Trump administration make college cheaper?
This Planet Money episode examines the Trump administration’s new student-loan policy and the big question behind it: can making federal loans less generous actually force colleges—especially graduate programs—to lower tuition? The episode focuses on the Department of Education’s move to cap most graduate borrowing at about $21,000 a year, a major shift away from the unlimited federal lending system that has existed since 2006. The core argument is that if schools can’t rely on easy federal money, they may be pressured to charge less—but the evidence on whether that really happens is mixed.
What the Trump administration changed
New graduate loan caps
- Starting July 1, the Department of Education is limiting how much students can borrow for most graduate programs.
- Most grad students will be capped at roughly $21,000 per year.
- Higher caps remain for some expensive professional programs, such as medicine and law.
- The policy is meant to reduce borrowing and, by extension, put downward pressure on tuition.
Why the administration says this will help
The administration’s logic is:
- More federal aid can let colleges raise prices without losing students.
- If borrowing is capped, schools may have to lower tuition to stay competitive.
The underlying theory: the Bennett Hypothesis
Origin of the idea
The episode traces this approach back to the “Bennett Hypothesis,” named after Reagan-era Education Secretary William Bennett, who argued in a 1987 New York Times op-ed that federal aid was enabling colleges to raise tuition.
The basic claim
- Colleges raise prices when more student-loan money is available.
- Therefore, limiting loans should reduce tuition growth.
The hosts note that the idea sounds plausible, but the real question is whether it holds up in practice.
What the research says
Evidence that supports the theory
One major study from Texas found that when graduate students suddenly gained access to much more federal borrowing through the Grad PLUS program:
- Graduate school prices did rise.
- The researchers estimated that for every $1 in additional borrowing, schools raised prices by about 64 cents.
That study is often cited by conservatives as evidence that loan caps can work.
Evidence that complicates it
Other research finds less clear support:
- A broader study of business, law, and medical schools nationwide found no strong evidence of a general Bennett Hypothesis effect.
- Some graduate programs are expensive because they are genuinely costly to run, not just because schools are trying to extract more money.
- In fields like medicine, the school’s costs can be so high that lowering loan availability may not significantly lower tuition.
Bottom line on the research
The episode concludes that:
- The Bennett Hypothesis may be true in some places, under some conditions.
- It is not a universal law that applies cleanly across all graduate programs.
How students and schools are likely to respond
Expected effects on graduate students
Experts interviewed on the show predict:
- Some students may become more price-sensitive and choose cheaper programs.
- Others may delay enrollment or not enroll at all if they can’t finance school.
- Some may turn to the private loan market, though that market is smaller and harder to access than it used to be, especially for lower-income borrowers.
What schools may do
- A few already say they may lower prices in response.
- Elite and high-priced schools, especially those whose tuition far exceeds the new cap, may feel the most pressure.
- But many programs already charge below the cap, so the policy may only affect about 30% of graduate borrowers.
Likely magnitude of change
The experts mostly agree that:
- Big tuition cuts are unlikely in the first year.
- Any downward pressure on prices will probably be modest and gradual.
Broader policy context
Undergrad vs. grad school
A key clarification in the episode is that:
- Undergraduate net tuition has been relatively flat for about a decade.
- The bigger tuition-growth problem is graduate school, where borrowing and prices have ballooned more sharply.
Additional federal change
The episode also mentions a new “do-no-harm” provision in federal policy:
- Programs whose graduates fail to earn more than a high school graduate may lose access to federal loans entirely.
- That is an even stronger incentive for colleges to show that their degrees have real economic value.
Main takeaway
The episode’s conclusion is cautious: capping federal student loans might put real pressure on some expensive graduate programs, but it is not a guaranteed or universal fix for college costs. The policy may reduce borrowing and push some students toward cheaper options, but it could also simply reduce access—especially for lower-income students—without dramatically lowering tuition everywhere.
Notable insight
- The administration’s strategy is less “make college affordable directly” than “make easy money scarcer and see what colleges do.”
- As one guest framed it, it’s almost a game of chicken between the government and schools—but students are the ones caught in the middle.