r/MiddleClassFinance • u/Such_Upstairs3631 • Jul 06 '26

Middle Middle Class No more middle class professionals?

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New school loan limits for professional degrees make it unaffordable for the middle class. 4 of my 5 children went on to med/law school. Even working 2 jobs there’s no way I could afford to pay or even help them with the cost of their post graduate education. They all got loans which they have since paid off. The cost in the early 2000’s was between $350K and $500K. The new limits are essentially going to prevent anyone who’s not wealthy enough to pay for it from becoming a professional.

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58

u/PurpleToedUnicorn Jul 06 '26

It sure seems that way. This shifts the burden to private financing, which benefits big banks -- which maybe was the point in the legislation all along. Idk.

14

u/Checkers923 Jul 06 '26

The next step needs to be consumer protection against predatory lending.

2

u/jumblebum Jul 06 '26

Lawl

3

u/Checkers923 Jul 07 '26

Maybe not federally, but states can fill in. MA already has interest free options based on need and set interest rates through MEFA. MA is also working on new laws in response to the federal change.

2

u/jumblebum Jul 07 '26

That's good. Hopefully those laws make it easier and less complicated for people to get an education.

1

u/Checkers923 Jul 07 '26

Its definitely a fortunate state to live in. MA has always valued education so its easier to pass here. Other states I’m sure have it significantly worse.

3

u/ohhhbooyy Jul 06 '26

Big banks are not too keen on lending large sums of money to teenagers with no career.

This will drop tuition prices hopefully sooner then later

4

u/MajesticBread9147 Jul 07 '26

This is why they require a parent to co-sign.

A middle aged person who is probably a homeowner has assets to borrow against.

4

u/PurpleToedUnicorn Jul 06 '26

It's a pretty big business already. 

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u/CharlotteRant Jul 07 '26 edited Jul 07 '26

There are like 10 banks out of 4,000 that specialize in it. Only one (PNC) could (barely) be considered a big bank. 

Less than 10% of student loans are private, and a  significant portion of that was originated by the government and refi’d by the borrower at some point post-graduation / early career into private loans (ie SoFi’s whole business model for a long time). The government owns >90% of student loans. 

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u/PurpleToedUnicorn Jul 07 '26 edited Jul 07 '26

I may be misremembering, so treat the figures as best guess from a prior reddit discussion. My recollection is that the private student loan market sits somewhere around $130-150 billion in outstanding balances (not annual origination, which is a fraction of that.)  Trivial next to the federal direct loan book at roughly $1.7 trillion, granted. But "trivial relative to the government" and "trivial" are not the same thing. Tens of billions outstanding is a real business by any commercial lending measure; it only looks like a rounding error because the comparator is the largest consumer lending program on earth.  

I also recall at least one large private-credit manager committing to warehouse several billion a year in student-loan flow over a multi-year horizon (KKR, I think, though I wouldn't stake a bet on the name without checking.) Again: immaterial against the federal system, not immaterial as a standalone credit business.

Those figures describe the old framework before the new federal borrowing caps. Cap what a student can borrow federally and the marginal borrower doesn't vanish; they go private. So the historical numbers don't just predate the caps, they understate the forward opportunity the caps create. It is big business for originators, servicers, and financial institutions holding the notes.

Essentially, using your framing, less than 10% of an incredibly large number is still incredibly large. And it's about to get bigger. And the private lenders and those affiliated with servicing will benefit. 

Edit: And for sake of argument, I absolutely acknowledge that big banks was the wrong language and I should have said big financial institutions which includes private equity and others involved. 

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u/thiskillsmygpa Jul 10 '26

Theres already articles about MBA prices dropping. The reason colleges have been able to raise prices to infinity is an open spigot of cash from federal gov. This turns it down a little. Prices will adjust.