Republicans’ Reconciliation Bill Will Transform Students into Commodities
By Persis Yu | September 18, 2025
Over the summer, President Trump and congressional Republicans were narrowly able to pass a gargantuan, and increasingly unpopular, reconciliation bill that slashed social safety net spending while pouring trillions of dollars into tax breaks aimed at the wealthy. While attacks on public programs like Medicaid and SNAP—which will result in tens of millions of families losing health insurance and food assistance—have sparked necessary outrage, elsewhere, the One Big Beautiful Bill Act represents the culmination of years of GOP attacks on a different public good: higher education.
The False Promise: “Market Forces” Will Lower Costs
Tucked into the budget bill are a staggering $300 billion in cuts to federal higher education programs, primarily through the federal student loan program. The bill includes the elimination of certain loans for graduate students, new annual and lifetime limits on federal loans for parents, cuts to Pell Grant eligibility, and new, stingier repayment options that will spike monthly costs and push borrowers further into debt.
Preying on the desperation of students and families across the country, congressional Republicans are selling this package as a solution to the ever-growing cost of higher education by forcing colleges to lower their costs. But in reality, the student loan limits and financial aid cuts in the bill, in addition to the extreme fiscal pressure now placed on state budgets, will raise costs for millions of families while cutting off access for the lowest-income students, whose federal aid will no longer cover their costs.
The New Loan Limits Will Set Predatory Private Lenders Loose
Meanwhile, an unregulated and predatory private market stands ready to fill in the gaps—and private lenders are salivating at the chance.
Speaking out of both sides of their mouths, proponents simultaneously claim that the new loan limits will allow market forces to drive the cost of college down and reduce students’ reliance on student debt, while also suggesting that greater involvement of private student lenders will increase students’ return on investment by imposing better market discipline on higher education.
But the argument that free markets will control the cost and improve the quality of higher education underestimates the harm that can be caused by setting private lenders loose on students and fundamentally misunderstands the relationship between these market participants. In a debt-financed higher education system, students are not the consumer; they are the commodity. While federal student loans also trap students in debt, the public and universal nature of the program makes room for priorities that the lesser-controlled private student loan market never would, like equity and access.
Free markets do not share the goals of the federal student aid system—they are not moved by issues of educational access; they do not care about ensuring that rural communities have access to adequate health care or that low-income communities have quality teachers; nor do markets care that democracy functions better with a well-educated populace. “Free markets” care about maximizing profit.
A History of Failure: Private Lenders and Predatory Colleges
Proponents of private lending suggest that market discipline will improve educational quality—arguing that students who receive a better education will land better jobs and will therefore be better able to pay off their loans. Yet time after time, history has shown us that private lenders instead work hand-in-hand with predatory, low-quality colleges and cash in at the expense of students whose degrees often produce little value in the job market.
In the decade leading up to the Great Recession, the largest private student lender, Sallie Mae, “forged sweetheart deals with some of the largest chains of for-profit colleges in the country,” providing loans to some of the most notorious schools, including Corinthian Colleges, and ITT Educational Services—both of which abruptly closed amid significant enforcement actions by numerous state and federal regulators, leaving students and the federal government on the hook for billions of dollars. Knowing full well that many of these students would default on their loans, Sallie Mae buffered its profits by charging students interest rates and fees that totalled more than 20 percent per year.
Private Student Loans Lack Relief, Protections, and Cost More
The credit crash of 2008 did cause many of the traditional private student lenders to tighten their underwriting standards or exit the market entirely. However, even with tightened underwriting standards, the terms of private student loans insulate private lenders from losses due to poor educational quality. Private student loans generally have more onerous repayment terms than federal loans, lacking options such as Income-Driven Repayment and often limiting and imposing fees for the use of forbearances. Notably, the budget bill would also make federal loans more expensive by forcing borrowers into higher cost repayment plans and eliminating critical deferments. Private loans also lack vital cancellation protections found in federal student loans, such as disability and death discharges, or Public Service Loan Forgiveness.
These terms often make private student loans much more expensive and risky for the borrowers. In fact, while private student loans account for only 8 percent of all student loan debt, they account for more than 40 percent of the student loan-related complaints that were submitted to the Consumer Financial Protection Bureau (also gutted by the reconciliation bill). Approximately one-third of these complaints were from borrowers who could not afford their monthly payments.
The lack of bankruptcy options for private student loan borrowers and the use of co-signers haves allowed private lenders to squeeze payments out of borrowers, even when they are experiencing financial distress. This means that so long as schools admit students who come from families wealthy enough to cover the private student loan at the outset, private lenders are guaranteed to make a profit.
Privatizing the Market Will Lock Low-Income Communities Out of Higher Education
But what about the many students who do not come from wealthier families? According to a Century Foundation analysis, 38.2 percent of consumers would struggle to obtain a private loan for themselves as a signer, or for a family member as a co-signer. These students will be thrown to predatory subprime lenders or denied an education altogether. Meanwhile, a new crop of subprime lenders—or shadow student lenders—has emerged in the past decade to take advantage of low-income students. As a result, private loans will not merely replace federal student loans; instead, they will limit access for students from the most underrepresented communities, raise borrowing costs, and eliminate vital protections that current federal borrowers rely on.
If Congress were serious about lowering the cost of college for everyday Americans, it would make the necessary investments to ensure that all families, regardless of race, economic status, or zip code, could access an education without taking on crushing debt. To be clear: students should be treated as neither consumer nor commodity; they are beneficiaries of a public good.
The Reconciliation Bill Is Just Another Corporate Handout At the Expense of Families
Far from the promise of lowering costs for students and families, Republicans’ One Big Beautiful (Ugly) Bill is just another effort to deliver handouts to corporations at the expense of everyday working families.
Contrary to proponents’ claims, the limits on federal student lending will not force colleges to lower costs. Rather, colleges will be encouraged to serve a different master—the profits of the private student loan market. Far from pushing universities to improve their quality of education, the limits will ensure that the only families who can afford to go to college are those with familial wealth.
With the right terms and so long as colleges peddle the “right” student, private lenders can profit off students regardless of their educational outcome. Colleges will no longer be encouraged to serve students from low-income communities or first-generation families—but maybe that was the intended outcome all along.
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Persis Yu is the Deputy Executive Director and Managing Counsel at Protect Borrowers. Persis is a nationally recognized expert on student loan law and has over a decade of hands-on experience representing borrowers.
This blog was also published on In Debt, a Protect Borrowers Substack.