To understand where this originated, we first need to travel back in time briefly to 1965. It was here where the federal government established what they considered their Regulations for Institutional Eligibility under the Higher Education Act. These regulatory standards provide the foundation for the changes made by the Department of Education.

The regulations for institutional eligibility provide the framework of how federal student loan caps should be determined. This process, as written indicates many factors that go into this, primarily emphasizing a calculation of debt-to-income ratios for degree programs. The Secretary of the Department of Education is responsible for the calculation of these metrics, but in short, the intention behind this was very clear. Jobs that require a higher level of degree lead to professions that have a higher income, thus, due to the fact that these professions can make a higher income, they can take on more debt than programs that do not lead to making a higher income. Due to this fundamental logic, caps were put in place for programs based on this, to ensure that people were not taking out more in student loans then what their intended profession could not financially allow them the ability to pay off.

The Higher Education Act of 1965 provided the initial definitions and terms used today to organize what programs and degrees can receive what federal student loan cap. In other words, what type of programs earns a higher amount upon graduation and can be granted the ability to take out higher amounts of federal student loans. The specific group of programs most up for discussion under the OBBB has been the “professional degree” group. While some may view the designation of a “professional degree” as merely a categorization by the federal government that has no bearing on the practical application of these degree programs, that couldn’t be more untrue. In fact, the reason this designation exists is to help set regulatory standards for the total amount of federal student loans a person can take out annually and across their life to afford higher education.

The addition of Clinical Psychology has sparked conversation around how broad and extensive of a list should the “professional” degree cover is the root of our conversation, due to the potential ramifications this could have on the job market for these professions and the ability to afford school for students.

In the Higher Education Act of 1965, the definition for a “professional degree” was stated to be;

A degree that signifies both completion of the academic requirements for beginning practice in a given profession and a level of professional skill beyond that normally required for a bachelor's degree. Professional licensure is also generally required. Examples of a professional degree include but are not limited to Pharmacy (Pharm.D.), Dentistry (D.D.S. or D.M.D.), Veterinary Medicine (D.V.M.), Chiropractic (D.C. or D.C.M.), Law (L.L.B. or J.D.), Medicine (M.D.), Optometry (O.D.), Osteopathic Medicine (D.O.), Podiatry (D.P.M., D.P., or Pod.D.), and Theology (M.Div., or M.H.L.).

Code of Federal Regulations

It is the specific section of the definition that reads “but are not limited to” that is beginning to spark more intense discussion. Department of Education committee meetings have indicated the addition of Clinical Psychology (Psy. d.) as an addition to this list of professions, however many believe that if we are going to add professions to this list, it should be aligned with the Financial Value Transparency and Gainful Employment (FVT/GE) list of qualifying graduate programs, to better cover many more professions than originally mentioned back in 1965. If the Department of Education is willing to follow this “but are not limited to”, non-exhaustive statement, then how far can this interpretation stretch?

On Aug 28th, the American Council on Education sent a letter to the Office of Postsecondary Education advocating for a broader interpretation of a “Professional Degree” within the Higher Education Act of 1965 allowing for the coverage of many more degree programs such as

In addition to ACE, many other organizations have expressed concern over how not broadening our interpretation of a professional degree will drastically impact the number of students pursuing these degrees and the subsequent ramifications this will have on the job market. Professions such as Nursing especially, being a position already operating within a job shortage.

Students pursuing a degree that falls under the list of “professional” degrees will be able to borrow up to $50,000 per year and $200,000 overall, however graduate programs that do not meet this criteria can borrow up to $20,500 per year and $100,000 overall.

This change in how students will use federal student loans has many short-term and long-term considerations that need to be evaluated.

Short-Term

The Glass Half Empty: On the short-term, there is still a lot yet to be determined, however, it is important to monitor what the intended time of implementation for this change will be. According to many, there are growing concerns that if the federal government targets a date in early 2026, this will have dire effects to current students, many of which will have just taken out loans under the previous policy just months prior. Will these students be grandfathered in under the regulations they had originally taken loans out under? If not, how will students already borrowing money be impacted by these changes? Could this change lead to increased dropouts at many institutions as a result of inability to cover the difference now that this change has been made?

The Glass Half Full: With the cost of higher education continuing to rise year in and year out, this change could also impact the overall affordability for many, leading to more students seeking alternative professions that do not require such a heavy financial burden, potentially leading to less students taking on potentially unmanageable debt.

Long-Term

The Glass Half Empty: Extrapolating some of these considerations out further it is important to consider how dropouts in these degree programs and a potential lack of financial access to higher education could impact the job market. If there are less people able to financial pursue certain degree programs how could this impact the demand for these professions overtime?

The Glass Half Full: Interestingly, one could also look at how this could impact universities. With less students able to afford their ever-growing tuition costs, how could this impact the cost of higher education altogether? One could think that lowering the cost of some of these programs could counteract the short-term challenges of affording school, allowing for more people to pursue these degrees once again and without requiring such a large accruement of student debt. With that being said though, even if this is the optimistic perspective on these changes, how long could it take for people to begin seeing this shift happen? And in that time, what will the short-term damages of this decision created?

Of course, there is still a lot to unpack with this situation, and still a lot of questions to be answered. It is important to continue reading and learning about developments with the OBBB and understand how these changes may impact everyday people.

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