Higher education has become a flashpoint for President Trump’s One Big Beautiful Bill, with opponents pulling out the stops to block some provisions that introduce a check on their longstanding, almost unrestricted access to public dollars.
For too long, higher education has gotten a blank check from American taxpayers, who are now on the hook for more than $1.6 trillion in student loans, with more added every semester. Only 38% of student loans are current and making payments, a ruinous record that consumes more and more of the federal government’s resources.
Speaker Mike Johnson and the House leadership courageously included two key reforms in the One Big Beautiful Bill: caps on government student loans and institutional risk sharing. Together, these reforms address the ongoing cost crisis in higher education and force universities to better align their degree offerings to the needs of the workforce.
Capping student loans introduces real limits on the flow of public tax dollars into the pockets of universities. Today, universities are allowed, at their sole discretion, to set the price for their services. Families see this as the “cost of attendance” in their award letters.
I have sat in the institutional meetings where this price is set. The focus is not on how much it costs to produce the degree (or how this can be done more economically). Rather, the focus is on, “What are our competitors doing and how can we position ourselves in the market?”
It’s rent-seeking behavior that drives excess.
This is how universities get families and taxpayers to pay for lazy rivers and rock-climbing walls (buried in the housing number), expensive overseas education centers and bloated administrative staff (in tuition), and expensive textbooks written by their professors.
Taxpayers bankroll these decisions through federal student loan programs. When students receive award letters, their “unmet need” shows the portion of the university-defined attendance costs not covered by grants, scholarships and other programs—with clear directions on how to borrow it from the federal government or private lenders.
Nothing in this model encourages minimizing costs—on the contrary, the model obscures the true cost of attendance. Even my colleagues over at InsideHigherEd.com question whether this should be regulated.
The bill’s loan caps are a much-needed first step and a strong signal to universities: There is a limit to the amount of public money they can expect from families and taxpayers now and in the future. It’s a warning shot, not a kill shot: The bill’s caps are modest and phased in over time to allow universities and markets to respond.
The second higher education reform holds universities partially accountable for the jobs and wages graduates obtain. It’s a reasonable measure because universities often encourage students and families to assume huge debts for degrees with no real market value. This leaves parents and students “upside down” making high loan payments without earning the income to make them.
This bill requires universities to have “skin in the game.” Each institution would be assessed a fee akin to an insurance premium based on their record of student loan defaults. For responsible institutions that actively pay attention to the value they create for their alumni, the costs will be low. Those who create the most “upside down” loans would pay the highest costs.
Each institution would have strong incentives to examine which alumni are unable to pay their loans and to find ways to improve outcomes for future students—something they should be doing already. Critics claim that they don’t have this data readily available; however, this claim goes to the heart of the problem: Student returns on their educational investments don’t seem to matter as much to universities as they do to the families that make them.
Higher education lobbyists are frantically trying to block these two innovations for good reason: They threaten to slow the firehose of taxpayer money flowing into universities. While these reforms are modest in scale, they represent a desperately-needed first step. Americans who care about the future of higher education need to reach out to their Senators’ offices and support these two critical innovations.
Even facing relentless pressure, the Senate must summon the courage to carry loan caps and risk-sharing forward, beginning the process of bringing college costs under control for American families and taxpayers.
Dr. Michael Shires serves as Vice Chair for Education Opportunity at the America First Policy Institute.