The Trump administration is once again turning up the heat on colleges and universities – this time as it threatens to cut off federal student loan funds to schools whose former students aren’t paying back what they owe.
In a notice expected to be sent out Monday and obtained by the Wall Street Journal, the Education Department said it will begin enforcing a long-dormant rule that could block schools from receiving new federal student loan money if too many of their graduates are in default. The move – a piece of a “broader strategy to accelerate repayments” – could put many institutions at risk of losing a key pipeline for tuition dollars, according to the Journal report.
“The government has long had the power to restrict federal student aid if too many students don’t pay it back—a check intended to make sure the government isn’t on the hook for degrees that don’t pay off for graduates,” the report said. “Losing eligibility for federal aid is a potentially devastating blow to a school’s ability to attract students.”
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The new warning on Monday comes as nearly 10 million borrowers are either in default or on the verge of it following the end of the pandemic-era pause on loan payments. According to the Department, nearly one in four borrowers could be at least nine months behind on payments within a few months – a sudden “shock” to borrowers nationwide following years of leniency under the Biden administration.
It also comes as Republicans in Congress weigh broader overhauls to the $1.6 trillion student loan system, the Journal noted.
“I do think that here’s some recognition, especially among Republicans, that maybe student loans are not an unalloyed good, and that we do need to have some rethinking of whether extensive borrowing is the right answer in every circumstance,” Preston Cooper, a senior fellow at the conservative-leaning American Enterprise Institute, told the Journal.
The new Trump administration's warning to colleges and universities is the latest in a series of escalations the MAGAfied government has had with higher education. Officials have targeted universities in recent months over campus antisemitism, compensation for college athletics, and have withheld research grants.
The Education Department also began sending defaulted student loans to collections on Monday.