By Jennifer Zhang and Peter Granville | March 31, 2026

Reforms passed last year will leave hundreds of thousands of students needing private student loans, but many will not be able to get them. New research finds that underwriting requirements will block 40 percent of Americans from private student loans. The promise that private loans will fill gaps isn’t just overstated: it’s empty.

Today, Protect Borrowers and The Century Foundation released a new report revealing that over 40 percent of Americans would likely be denied access to loans from the vast majority of traditional private and state-affiliated lenders, which would lock many of them out of a college education.

The report comes as the U.S. Department of Education actively implements unprecedented changes to the federal student loan program under the “One Big Beautiful Bill Act” (OBBBA), which will drastically reduce access to higher education for millions of students and families. Proponents of the OBBBA and other industry attempts to reduce federal student lending have long argued that capping federal student loans would drive down the cost of higher education, and the private student loan market would fill funding gaps left by reductions in federal loans. Our new research shows that these promises are not only overstated, but empty.

The OBBBA cut higher education and financial aid programs by $300 billion and placed significant caps on federal student loans. Its additional trillion-dollar-plus cuts to Medicaid, SNAP, and other federal programs that provide critical support to working families and state revenues, will further strain state budgets and likely result in cuts to state funding for higher education. Contrary to proponents’ claims, these cuts will lead to further increases in tuition costs at public institutions. Importantly, the law did not pair the new student loan caps with tuition limits or increased public investment to mitigate harm.

In short, the OBBBA not only will make college more expensive for those who can take on private loans, but also will deny access to the 40 percent of students who can’t.

Key Findings

As authors of the report, we conducted a structured review of the minimum credit score and income requirements of 34 private and state-affiliated lenders that comprise a significant majority of the private student loan market. We found:

  • Over 40 percent of Americans would likely be denied the vast majority of private student loans from traditional, prime lenders based on credit and income underwriting requirements. These requirements are a credit score of at least 640 at a majority of lenders and a household income of at least $30,000 at a majority of the lenders that disclose their income requirements.
  • Nearly 2 in 3 Pell Grant recipients (61.1 percent), who are disproportionately students of color, would be excluded from qualifying for the vast majority of private student loans from traditional, prime lenders based on minimum income requirements.
  • Every lender in our analysis requires that the borrower or cosigner must be “creditworthy.” This requirement likely prevents over 1 in 4 Americans (25.7 percent) from qualifying for practically any private student loan from a prime, traditional lender.
  • About 82 percent of non-profit lenders (18 out of 22) and over half of the total lenders in our analysis (19 out of 34) are residency restricted or require a student to attend a school in a limited number of states, in order to qualify for a loan. Given non-profit lenders’ geographic restrictions and stringent underwriting criteria, they are unlikely to fill the gap for borrowers who are shut out of the private market; if anything, they are even harder to access.
  • Between 61 percent to 100 percent of loans originated by the lenders in our sample have cosigners. This underscores the private loan market’s continued reliance upon household wealth and financial stability for underwriting borrowers’ loans, and how the private market continues to disadvantage low-income and underprivileged borrowers.
  • In the few instances where lenders disclosed separate underwriting criteria for graduate loans, they generally required applicants to meet either the same or higher minimum credit score and income requirements than for undergraduate loans. Therefore, our exclusion findings apply to and may be even higher for graduate students seeking loans in the private market.

Read the full report here.

What This Means

Our research findings directly rebut claims from the private student loan industry and proponents of the OBBBA that private loans are the solution for students and families as they seek to fill new gaps in financial aid to pay for college. In reality, the law’s failure to decrease tuition in order to address the harm from reducing access to federal loans will make college more expensive and inaccessible to working families. These changes mark the end of an era in which Congress tried to ensure that all students—regardless of their income or family background—had equitable access to college.

“These changes mark the end of an era in which Congress tried to ensure that all students—regardless of their income or family background—had equitable access to college.”

As a result of the OBBBA, many students of color and those from low-income families will be locked out of higher education. These students are overrepresented among those with lower credit scores, due to historical and ongoing racial inequities and discrimination. As a consequence, they will disproportionately struggle to obtain a loan from traditional lenders. According to a Century Foundation analysis, about 38 percent of Americans overall have limited credit history or poor to fair credit, a figure that rises to over 61 percent of those living in majority Black or majority Native American neighborhoods, over 48 percent of those living in majority Hispanic neighborhoods, and nearly 47 percent of those living in majority people of color neighborhoods.

The report contributes to a large body of scholarship demonstrating that increased reliance upon private student lending is harmful to borrowers. Even borrowers who do manage to scrape by minimum underwriting cutoffs will face higher interest rates and consequently spend more years paying down their debt. Private loans are generally more expensive—with interest rates as high as 26 percent, compared to 6.39 percent for federal undergraduate loans, 7.94 percent for federal unsubsidized graduate or professional loans, and 8.94 percent for PLUS loans. The additional funds sunk into paying off the higher interest rates that come with private loans can prevent borrowers from buying a home, having children, retiring, or achieving other critical life milestones. Private loans also lack protections and benefits found in federal student loans, including the right to income-driven repayment plans; protections in case a borrower loses their job, is defrauded, or becomes permanently disabled; and a pathway to cancellation after ten years of public service or twenty to twenty-five years in repayment.

While students and families pay the price of this switch to private loans, both prime and subprime shadow lenders will make windfall profits. In the aftermath of the OBBBA’s passage, many leading commercial lenders, including Navient, Nelnet, SoFi, and Citizens Bank, disclosed in letters to Congress that they anticipate an increase in private student loan demand. Lenders are also ready to leverage students’ desperation to extract more profits than the actual risk of lending justifies. In November 2025, the CEO of SoFi disclosed that its in-school private student loans have credit performance that is “actually as good as” its refinancing loans, but they could charge interest rates to undergraduates that are “almost 30 to 40 percent higher.” Some lenders, such as Sallie Mae, Navient, Earnest, SoFi, and Navy Federal Credit Union, stand to scoop up millions of prime borrowers, and millions of dollars in interest, despite having a history of breaking consumer protection laws and harming borrowers.

Recommendations

When signing the Higher Education Act of 1965 into law, President Lyndon B. Johnson remarked that its passage meant, “a high school senior anywhere in this great land of ours can apply to any college or any university in any of the 50 states and not be turned away because his family is poor.” The OBBBA takes an axe to this vision.

By limiting access to federal student loans and cutting critical social safety net programs—just as states are grappling with budget shortfalls that will likely lead to even further tuition increases—the OBBBA will reduce access to higher education and force millions of Americans to resort to a private market that heavily conditions access on their income and propensity to turn the lenders a profit. In other words, the OBBBA further cements wealth and privilege as prerequisites for accessing higher education.

The following are our key recommendations for how to address systemic problems in both the private student loan market and how our nation finances higher education.

States should require private student loan companies to register with state regulators and should mandate public reporting by lenders to increase transparency into the growing private student loan market.

Lenders offer little to no uniform data about their products, including the interest rates offered to borrowers, underwriting criteria, and collection activities. Our research required compiling disparate data from many sources and making many disclosed, conservative assumptions that ultimately underestimate the share of Americans who may not be able to access a private student loan. This lack of transparency is all the more unacceptable, especially as borrowers are increasingly forced to rely upon private debt to pay for college. So far, only eight states have passed legislation requiring private lenders to register and report on their lending activities. State private loan registries and public reporting will allow state regulators and law enforcement agencies to conduct critical oversight, take action over potential fair lending violations and borrower abuses, and realistically assess their residents’ access to affordable higher education. Protect Borrowers maintains sample legislation for states to create private student loan lender registries.

Critically, the answer is not to expand subprime lending, which can destroy borrowers’ credit and sow financial instability. Nor should states rush to expand the same set of alternative, state-based lending programs that have failed borrowers in the past.

State lenders are among those assessed in our report, which finds that they often have highly exclusionary income and credit score cutoffs. State lenders also have a long history of engaging in aggressive debt collection practices against borrowers (including for loans taken out for students who have passed away), leveraging collection powers that are far stronger than those available to private companies, filing lawsuits against struggling borrowers to collect on loans, and even arguing in court that they are not obligated to follow consumer protection laws because they are government entities.

A higher education funding system that relies upon lending at all—including federal, state-issued, or private student loans—inevitably saddles millions of borrowers with years of payments that reduce their savings for major financial milestones, depress consumer spending, and leave borrowers drowning in inescapable debt, ultimately denying the financial stability that a college degree has long promised. Student debt shifts onto individuals the cost of paying for the public good of an educated workforce, which benefits all of society with increased productivity, broader economic prosperity, and a more resilient democracy.

It is long overdue for federal and state governments to directly fund higher education as a public good, and not finance it through debt that undermines the very opportunities it is meant to create.

Read the full report here.

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Jennifer Zhang is a Research Associate at Protect Borrowers. She was previously a Director’s Financial Analyst at the CFPB, where she worked with the Student Loan Ombudsman’s office, the Policy Planning & Strategy team of the Director’s front office, and the Quantitative Analytics team of the Enforcement Division.

Peter Granville is a Fellow at The Century Foundation, where he analyzes federal and state policy efforts to improve college access and affordability. His research examines the impacts of tuition prices, financial aid, student debt, and government funding on families’ ability to access and afford higher education.