Minnesota officials warn HR1 and Education Department rule changes will squeeze borrowers and skew graduate enrollment

State higher‑education officials and university finance officers told a Minnesota Senate subcommittee on Nov. 10 that federal changes to student loan policy and program eligibility could reduce borrowing options, lengthen repayment, and push some students to private lenders with much higher interest rates.

Dr. Wendy Robinson, assistant commissioner at the Minnesota Office of Higher Education, summarized recent federal changes and timelines: certain revisions to the Public Service Loan Forgiveness program will take effect July 1, 2026, and guidance could exclude borrowers whose employers are deemed to have a "substantial illegal purpose." She also outlined the reconciliation legislation (the "One Big Beautiful Act" referenced in testimony) and the new RAP income‑based repayment plan that can extend repayment periods to 30 years and remove some income protections currently available under plans such as SAVE.

"The RAP program will also allow for repayment terms of up to 30 years before loan forgiveness would be an option... The RAP program will not offer any income protection," Robinson said, warning the changes could increase defaults and extend debt burdens for borrowers.

Nate Peterson, executive director of student finance at the University of Minnesota, presented modeling of HR1 impacts using 2024–25 data: he said 2.1% of student borrowers (about 283 unique students) would be affected by a proposed lifetime aggregate federal loan cap (reported in testimony as roughly $257,500), and that professional students — in medicine, dentistry, law and veterinary programs — would be disproportionately affected. Peterson also said proration of loans for less‑than‑full‑time enrollment would affect about 5% of undergraduates systemwide and much higher shares at specific campuses.

Students and campus officials warned of the private lending alternative. Dr. Robinson said private student‑loan interest rates often fall in double digits and cited examples of borrowers in Minnesota paying up to 20–25 percent on private loans. "For private student loans ... we see maximum stated rates around 17 to 18 percent and outliers we know of up to 25 percent," she told the committee, and said such debt often cannot be discharged in bankruptcy.

Committee members pressed for modeling of how many Minnesota students and programs would be affected and asked universities to provide more granular numbers. Senators expressed alarm that limits and program changes could shrink professional pipelines (medicine, mental health, education) and constrain public‑service career recruitment if forgiveness rules narrow.

The hearing did not produce new state policy but generated requests for additional data and for the legislature to continue monitoring federal implementation and potential state mitigation steps.