The Small Business Administration (SBA) is reportedly exploring the creation of a new student loan program, a move that comes as recent changes to federal lending limits may create financial gaps for students. The initiative, discussed by an SBA official at a conference, aims to provide an option that falls between fully private loans and the newly capped federal lending.
This potential program arises in the context of President Donald Trump's broader efforts to reshape federal agencies, including the Education Department. The new limits on federal student loans, which took effect July 1, are expected by many school leaders to push students toward bank loans, potentially excluding those with riskier financial profiles.
Ray Jones, chief product officer at South Carolina Student Loan, noted that the changes present an opportunity for new products to responsibly fill these emerging gaps. However, consumer advocates have raised concerns. Mike Pierce, executive director of Protect Borrowers, warned that such a program might lack the crucial protections afforded by traditional federal loans, such as income-driven repayment, public service loan forgiveness, and cancellation in cases of disability or school fraud.
These concerns echo criticisms of the former Federal Family Education Loan program, which partnered the government with banks for student lending. That program was largely eliminated by Congress in 2010 due to high costs and criticized lender practices.