Given the multifaceted problems that the US higher education is facing then managing student loans is not a one-person game, at least in the medium-run. Short-run analyses can only be done, if one knows what agenda is on the table? Analyzing the dynamic and the motivations of current policy makers and thinking the following factors may help to find proxy answers: (1). Policy will be aimed to reduce student loans default; (2). Collections on past and current student loans are a priority; (3). Reduction of future federal student loans is imminent. While no one knows exactly, what is in the mind of the decision makers, a forward-thinker knows that the DOE’s budget has been or planned to be cut by $9.2B (negative 14%). Consequently, future student loans may got impacted in a negative.
Given the above facts, loans unavailability will increase and the impacts can be significant for some players as shown in the following static equilibrium analyses. So, current $1.3 trillion loans will increase in a slower rate in years to come (later, this can be claimed as a successful policy by the regulator). Borrowers will rely more on private sources, if they want to get a college degree, unless the State and parents are willing to dig their pocket deeper. Financial companies will have more business opportunities as it seems the policy benefits them most. However, the following parties on the demand side, and selected service providers will be impacted negatively:
- Student borrowers (more profound on lower-income population) and their parents.
- In general, all private non-profit and non-state owned colleges will suffer due to the reduction on enrollment and a weaker demand for education services.
- High-operating-cost organizations.
- More families will relocate to a State that strongly support its public higher education with its reduced or free-college tuition policy for adults or for Associate degree programs. Example: In the state of TN.
The bottom line is that except for getting back the loaned federal money, other issues in higher ed seem not to be a top priority in the mind of the decision makers, at least for now. Uncertainty will increase. Though challenging, IRI Analytics might be able to lower the risk to go under for certain institutions (non-profit higher learning institutions~1475 pages pdf file), where their total spending exceeds total tuition revenues through various strategic remedies.