On Independence Day in 2025, President Trump enacted the One Big Beautiful Bill Act (OBBBA). While much of the conversation surrounding this legislation has focused on various elements, its implications for students seeking loans for higher education—be it college, graduate school, or professional school—have not received adequate attention. Should American students truly be compelled to incur debt to pursue their education? It seems unreasonable, but that’s a discussion for another day. [1]
Today’s focus is on the sudden changes in student lending regulations under OBBBA, which lack a transitional period and jeopardize the educational aspirations of many medical students. Drawing on my extensive background in medical education, I believe my insights will resonate broadly, covering both public institutions like UCLA and private ones like Stanford.
Most medical students carry a debt burden from their undergraduate studies. For the Class of 2030 entering medical school in August 2026, the new cap on Federal Direct Student Loans is set at $200,000. This limit also applies to other graduate and professional programs [2]. While $200,000 may appear generous at first glance, it falls short. The annual cost of attendance (COA) at Stanford Medical School exceeds $100,000 each year [3]. Medical school in the U.S. typically spans four years following a four-year undergraduate degree. My own institution has a lower COA due to reduced tuition, but our students will face similar challenges. [4]
What are the potential ramifications of OBBBA’s borrowing limits? An enlightening report released this February by U.S. Senators Warren, Schumer, Sanders, Blumenthal, Hirono, Merkley, Van Hollen, and Wyden details these impacts in Costly Consequences: How the Trump Administration Unleashed Private Student Loan Lenders (pdf). Here’s an excerpt from the Executive Summary:
On July 4, 2025, President Trump signed the One Big Beautiful Bill Act (OBBBA) into law. Among its various provisions, this law imposed new caps on federal student loan borrowing, resulting in a substantial expansion of the private student loan market. (emphasis added)
This report represents the first Congressional assessment of how OBBBA’s student loan provisions impact the private lending sphere, based on data shared by six major private student loan lenders during Congressional oversight. Collectively, these lenders—Navient, Sallie Mae, SoFi, Citizens, College Ave, and Nelnet—issued over $14.7 billion in private student loans in 2024. The findings reveal that:
- Leading private lenders have consistently increased their lending activities, despite ongoing predatory practices in the private student loan sector.
- With OBBBA’s borrowing caps in place, lenders anticipate a growing demand for private loans, with at least one lender already planning to expand its offerings.
- Most surveyed private lenders provide minimal protections for borrowers facing fraudulent practices from schools or abrupt school closures.
- Half of the surveyed lenders have either sold student loans to private equity firms or intend to do so in the near future.
- While most lenders express a willingness to enhance customer service capacity in anticipation of increased private loan demand due to OBBBA, concrete plans are still in the works.
Although medical students can borrow up to $200,000, this amount is unlikely to fully cover the costs of their education. A major aspect of OBBBA is the termination of the Grad PLUS loan program, which previously allowed medical students to finance their entire education at a modest interest rate of around 7%, along with a 4% initiation fee—reasonable for both borrowers and lenders. Current students enjoy some protections through legacy provisions, but if any interruptions occur in their education (due to reasons such as illness, parenthood, or minor academic setbacks), they risk being removed from their programs altogether. Consequently, students who experience interruptions may find themselves compelled to rely on private loans to complete their education. It’s worth noting that medical school demands full-time commitment, and those attempting to work part-time while studying face severe risks of academic failure. Without institutional scholarships or grants, they will likely need to navigate the private lending market, if it’s accessible at all.
The likely repercussions of relying on private loans include the necessity of a credit check—many students may not meet these commercial standards due to factors like low or nonexistent outside income and limited credit history. Additionally, criteria such as needing a cosigner who meets credit requirements can further exclude struggling students. Private loans often carry exorbitant interest rates, sometimes as high as 18%. Unlike federal student loans, private loans do not qualify for public service loan forgiveness plans or income-driven repayment options—crucial provisions for those aspiring to work in nonprofit primary care settings, often in rural or underserved areas. Notably, almost all rural regions in the U.S. are classified as medically underserved, thus students seeking to practice in these communities are placed at a massive disadvantage.
Further analysis by the Century Foundation (pdf) titled Access Denied: How 40% of Americans Are Locked Out of the Private Student Loan Market adds depth to this issue. The Executive Summary states:
Supporters of the new legislation contend that the private student loan market is better positioned to assist students and families in need of financial support for higher education, promising to fill potential funding voids. Private lenders have long advocated for stricter federal loan limits, and now that Congress has acquiesced, they are eagerly anticipating a surge in new business. (emphasis added)
However, our detailed evaluation of 34 commercial private student loan lenders indicates that claims of the private market filling the gap left by new federal loan limits are both exaggerated and misleading. While private lenders stand to benefit enormously from these legislative shifts, our analysis reveals that approximately 40% of Americans will likely be denied access to traditional student loans from reputable lenders, forcing them to consider predatory subprime lenders or abandon their educational pursuits entirely. Key findings include:
- More than 40% of Americans would likely be ineligible for most private student loans from prime lenders based on credit and income criteria.
- Approximately two-thirds of Pell Grant recipients (61.1 percent), a demographic heavily represented by students of color, would likely be barred from accessing most private loans from prime lenders due to income limitations.
- Every major lender in our analysis mandates that borrowers or cosigners must be “creditworthy,” which effectively excludes over 25% of Americans (25.7%) from qualifying for private loans from reputable lenders.
- Roughly 82% of non-profit lenders impose significant state residency restrictions, further narrowing eligibility alongside stringent underwriting standards.
- Between 61% to 100% of loans from sampled lenders require cosigners, highlighting the private loan market’s ongoing reliance on household wealth and financial stability, disadvantaging low-income and underprivileged borrowers.
- In instances where lenders provided separate underwriting criteria for graduate loans, the requirements tended to be the same or even stricter than those for undergraduate loans, suggesting our exclusion findings extend, if not worsen, for graduate and professional students.
It’s important to clarify that our analysis considers only borrowers potentially excluded based on income and credit score. Other prevalent underwriting criteria—such as debt-to-income ratios, minimum employment durations, and state-based residency requirements—were not factored in, rendering our findings a conservative estimate of those who might be shut out from private education loans.
Recent reports indicate that educational institutions are cognizant of these underwriting obstacles and are quietly negotiating with lenders to create more inclusive lending mechanisms, albeit with their own risks without an expanded safety net for students.
Across consumer finance, the combination of lax underwriting standards, high interest rates, and elevated expected default rates are characteristic of predatory lending practices, and the private student loan sector exemplifies this trend. (emphasis added)
When I contemplated attending medical school as an undergraduate, a strong predictor for success was having one or both parents who were medical or law school graduates. However, this has evolved, largely due to federal student loans assisting in this journey. Following OBBBA, it appears that ambition and hard work are now weighted less heavily than advantages of birth. [5] This situation complicates nationwide efforts to attract medical students from disadvantaged or rural backgrounds—often one and the same—who aim to return and practice medicine where it’s needed most rather than in urban centers. All this occurs for no good reason, save for enhancing the fortunes of those in the private student loan sector.
Lastly, returning to the rising costs of medical education in the United States, akin to all higher education, tuition has inflated dramatically as universities morph into luxurious finishing schools rather than serious academic institutions. A close colleague once attended a state-supported medical school where he graduated debt-free, thanks to his spouse’s income and family housing benefits. Many from our generation were able to do similarly. Personally, after a lengthy apprenticeship as a lab coordinator, I graduated with my PhD without incurring debt. My children were fortuitous enough to emerge from university in the same fortunate position, largely due to the enduring legacy of the late Georgia Governor Zell Miller.
While this does not excuse our broader systemic issues, it should be noted that current medical school debt can be swiftly repaid by young physicians who maintain their focus. Unfortunately, those who veer off track often fall prey to unsustainable financial habits, as hinted by a colleague, a Chief Medical Officer at a nearby hospital. These individuals, after years of hard work, may feel prematurely entitled to extravagant lifestyles instead of laying a strong foundation for their futures. The trajectory for many is heartbreakingly predictable.
However, for those currently entering the pipeline or newly embarked on medical school, the rules have shifted unexpectedly. As certain individuals who have never faced financial constraints resent the idea of “lesser” students obtaining loans to achieve their dreams, the future for aspiring medical professionals becomes uncertain. Many might run out of financial resources before completing their education or be forced into the predatory private loan market. This creates additional stress for students and their families, while lenders prosper amid this turmoil. The system, as it perpetuates itself, shows no signs of meaningful change despite all the optimistic rhetoric surrounding it.
It is utterly absurd that postsecondary, graduate, and professional education in the U.S. remains financially out of reach for so many unless they incur substantial debt. A performative, ineffective approach to solving chronic problems will not yield results. A similar ill-fated attempt was made with tariffs, a politically motivated initiative that proved ineffectual and ultimately illegal according to the Supreme Court.
Regrettably, this lack of understanding permeates the political landscape across the board, remaining unrecognized by both political leaders and their supporters.
Notes
[1] For context, my first-year tuition (adjusted for inflation using the BLS Inflation Calculator) at my flagship state university was $3,968, in stark contrast to the current $11,800 (+197%). Room and board expenses were also significantly lower back then ($405 and $675 for three 11-week quarters). Tuition once constituted roughly 10% of university budgets, a figure that has now skyrocketed to more than 35% according to recent reports, an increase often unrecognized as a tax hike.
[2] Full-time academic graduate programs in traditional disciplines often include tuition scholarships and stipends that cover most of their costs. However, this is generally not the case for professional programs such as medicine, nursing, and law.
[3] The annual COA includes tuition, fees, books, housing, food, transportation, health insurance if necessary, and a modest allowance for personal expenses. For further details, the annual COA at Stanford Medical School can be found here.
[4] Generally speaking, it is less consequential where a U.S. doctor earned their medical degree. There are high-quality practitioners from all over. Every U.S. medical school is required to comply with stringent standards set by the Liaison Committee on Medical Education (LCME), and all American medical students must pass their United States Medical Licensing Exams (USMLE), crucial steps to advancing in their medical careers.
[5] While many may find golf to be an unapproachable activity, consider this for a moment: one of the president’s justifications for dismantling public golf in Washington D.C. was the assertion that it should be an “aspirational” undertaking, geared only toward the wealthy. This perception loses the essence of the game, which should indeed be accessible to everyday individuals. Following a recent visit to Scotland, I observed that many golfers, including educators and young players, enjoy quality courses at reasonable fees, reflecting a far less elitist vision of the sport. Such accessibility should similarly apply to the profession of medicine, where ambition should not be thwarted by financial barriers.
