Higher Education wasn’t a hot-topic during the recent election which presents a level of uncertainty surrounding the future of Higher Education. In addition, President-elect Trump’s nominee for the U.S. Department of Education has very little experience in post-secondary education. However, the coming months should start to shed light on what the future landscape could look like. In the meantime, there have been indicators of what potential changes could be based on recent comments by President-elect Donald Trump. Some potential initiatives include:
Removal of government from student lending –Trump’s campaign has mentioned the idea of moving student lending solely to private lenders. Federal loans tend to have better repayment terms and lower interest rates. However, proponents of private lending believe that a market-driven approach to lending will help cut down on loan defaults and over borrowing by better monitoring a student’s ability to repay.
Modification of income based repayment – Trump has mentioned the idea of changing loans to income based repayments by allowing borrowers to pay 12.5% of their discretionary income with loans being forgiven after 15 years. This idea has been put forth by others as well as one of the ways to minimize the debt burden on millennials and others.
Risk sharing –Many, including Trump, believe colleges and universities should share some of the risk and be held financially accountable for students defaulting on their loans. This could create a need for a more risk-based approach to student lending by colleges and universities in order to lessen lending to students and majors that may be less likely to repay all, or a portion, of their loans.
Regulatory burden – Trump has indicated the need for colleges and universities to make education more affordable through various vehicles such as utilizing endowments and changing how students repay loans. However, he also noted that federal regulations have created unnecessary burdens and costs for colleges and universities. Trump’s recent nomination of a team to study regulations for business may tackle this. As a result, many expect that there will be some level of deregulation in Higher Education to help lower costs.
Over the next few months as policy becomes more clearly articulated, we will continue to monitor the impact on Higher Education.
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