WSJ: new federal limits on graduate school loans are already reducing MBA costs

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The press is reporting that MBA programs are slashing tuition, though they’re focusing on the hole and not the donut: Colleges are at long last under pressure to cut prices because last year’s tax bill limits federal loans for graduate students.

The University of California, Irvine, this month said it will reduce tuition for its MBA program by $30,000 to $99,000. “The Merage Flex MBA’s new tuition falls below the federal loan cap of $100,000, removing a critical financial barrier for working professionals across Southern California and beyond,” the university said. It boasted that its “MBA is priced within reach of government loan limits—making a world-class degree not just aspirational, but truly attainable.”

You have to love how the university spins virtue out of necessity. The GOP tax bill last year capped the aggregate federal debt that graduate students can take out at $100,000, and $200,000 for professional degrees like law and medicine. Previously, grad students could borrow an unlimited amount.


film and video studies where students who take on federal loans leave with $168,000 in debt on average but earn just $47,000.”

Struggling borrowers would then enroll in the Obama and Biden loan forgiveness plan in which the feds wrote off one-third of debt. Graduate programs became cash cows for universities, which raised prices to take advantage of the open spigot of federal loans.

A 2023 study in the National Bureau of Economic Research found that the 2006 law that uncapped federal borrowing for graduate programs didn’t improve access or degree attainment. Colleges merely raised tuition to capture more federal loans. “Sticker prices went up approximately dollar for dollar with increases in federal loans,” the economists found.

The new loan cap is increasing pressure on universities to cut prices and offer more financial aid. While graduate students can still take out private loans to pay for their degrees, they carry higher interests rates and come with stricter underwriting. Unlike federal loans, borrowers can’t get them discharged via special repayment programs.

All of this reinforces that universities respond to government incentives like any business. For too long those incentives encouraged colleges to raise prices and bury students in debt. One of the 2025 tax bill’s overlooked benefits is that it will impose a modicum of financial discipline in higher ed.

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