Jan 03, 2017 / by Alec Reinstadtler
WHAT’S THE LIKELY TRUMP EFFECT ON HIGHER EDUCATION?
Now that the nation has spoken, people are interested in what is likely to happen in a variety of industries once President-Elect Trump takes office this month. Likewise, in higher education, our clients and other interested parties that follow this industry want to understand what is likely to happen in higher education, in particular with regard to regulation, with President-Elect Trump’s impending inauguration.
There are more questions than answers at this point given that higher education was never listed as a priority by the Trump campaign but here are a few of our predictions based on what we have seen:
1. No Free Ride – The Clinton campaign, based at least in part on the resounding support for this position earned by her opponent in the democratic primary Senator Bernie Sanders (D-VT), stressed that the government should provide free higher education. They proposed to levy new taxes on our wealthiest citizens to pay for it. While we’re not federal budget or political experts, this math always seemed suspect. Mr. Trump talks more about student loan reform than free college and he appears much less likely to raise taxes specifically to pay for college subsidies. We believe it is safe to say that if you want to go to college in the next four years you’re going to have to pay for it.
2. Student Loan Reform – President-Elect Trump has said that he wants to bring the private sector back into the student loan mix, but hasn’t yet offered up much detail regarding what shape this may take. One potential concern with this idea is that if you put the risk back on banks and other private lenders, they won’t lend to the majority of college students — those with little or poor credit. Another challenge is that banks may be less interested in getting back into the student lending business since the government eliminated the Federal Family Education Loan (FFEL) Program, which provided some guarantees and insurance through the federal government. Student lending is unlikely to be an important focus for most banks unless the government makes it too good to pass up, in which case is it really in the best interests of taxpayers?
3. For-profit Education Reform – Within the realm of higher education, the Obama administration has primarily been focused on reforming the for-profit college sector through a variety of regulations that are applicable, almost exclusively, to that group. Given President-Elect Trump’s background, it seems more likely that his reform efforts will either pare back some of the Obama administration regulations or at least make them applicable to all schools. In the past, the President-Elect has been critical of the cost of higher education without singling out any specific sector. As a result, we expect President-Elect Trump to have more focus on student loan reform than, for-profit education reform specifically.
All of us at Loan Science are keenly interested in how the policies and programs of our new President will unfold and impact the higher education sector. As we’re sure you will be, we will be following these topics as new proposals for regulations and programs unfold, and look forward to working with you to always stay on top of new risk management and regulatory compliance requirements.