Are Stricter Student Loan Caps Coming? Democratic Senator Pushing for Borrowing Limits
April 2, 2014

The Higher Education Reconciliation Act of 2005 increased both undergraduate and graduate annual limits and at least one lawmaker would like to see this statute reversed. Democratic Senator Tom Harkin of Iowa, Chairman of the Senate Committee on Health, Education, Labor and Pensions, believes the increased loan limits have exacerbated the student loan crisis and national debt.

Should there be a ceiling on student loans?

Senator Harkin proposed student loan caps for graduate degrees

A recent report by the New American Foundation – The Graduate Student Debt Review – has pronounced that the biggest factor in America’s student debt bubble is the rising debt associated with graduate and professional degrees. Their number crunching found that 40% of recent federal loans is attributable to graduate debt making post-secondary students disproportionate consumers of student loans.

The Foundation also found that graduate and professional students are responsible for the greatest increases in student loan debt between 2004 and 2012. During this period, costs of Master’s degrees jumped nearly 60%, yet for many professions, a Master’s degree is not necessary and will not necessarily be worth going into debt to obtain. Beyond the burden on the students themselves, Harkin is concerned with how much taxpayers are being burdened by those that borrow but don’t repay in full.

Chart of student loans over the past decade

Student debt over time
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With Income Based Repayment now becoming more prevalent and balances eligible to be forgiven without limit, Congress has applied pressure to the Obama administration. Recent budget proposals by Congress and POTUS have suggested capping loan forgiveness and making Public Service Loan Forgiveness taxable in response to these concerns.

Aligning with Senator Harkin on this issue is Tennessee Senator Lamar Alexander who has expressed concern over students borrowing to cover living expenses above and beyond the costs of tuition, fees and books. Alexander wants to see a cap on student loans borrowed for living expenses and also wants to dig into students that are borrowing but not achieving any credits or borrowing when attending half-time or less. Harkin has proposed limiting part-time students to not being able to borrow as much as full-timers.

Inarguably, some of this makes sense. Students attending school online (one of the concerns Alexander and Harkin have) shouldn’t be able to borrow for living expenses, since they’re not changing their circumstances. Part-time students definitely shouldn’t be able to borrow as much as full-time, and if you don’t garner any credits for a semester, it seems like what you borrowed should be due immediately and perhaps you should have to earn some credits on your own dime or pay back the unearned amount before you can borrow again.

But throwing up barriers at the graduate studies stage isn’t the answer. This is far too late. What we hear time and again is that people were making serious debt decisions at a young age without a clear understanding of what they were getting into, how much debt they were amassing as an aggregate and what this truly means. Ironically, although the debt taken on is for education, there’s not enough education about the debt itself taking place.

There should not just be pre-borrowing education and counseling pre-graduation. Rather than a digital signature sufficing and loans being automated and churned out, there should be a more thoughtful process to slow the borrowing roll. There should be a face-to-face session every semester that spells out for the student some info like this:

“You have borrowed x amount so far. This will result in x dollars paid back each month for ten years. Once you sign for this semester’s loan, your aggregate debt will be x amount, resulting in x dollars each month. If you pay x dollars back each month on your interest, you can save x dollars in the long run. Are you sure this is the amount you want to borrow? Can you make do with less? Did you know that if you don’t need all of the money, you can give it back once you’ve paid your expenses, bought your books, etc?”

Part of this thoughtful process is keeping up to date on what you owe – this is made easy with’s free student loan tool to track and optimize your debt.