Trump Executive Order On College Accreditation Reform Has Big Potential Implications For Borrowers
President Donald Trump signed an executive order on April 23 titled, “Reforming Accreditation to Strengthen Higher Education,” which promises a significant shake-up in how colleges are accredited and, by extension, how federal student aid flows. The Trump executive order is framed as a student loan accreditation reform to raise the bar on college quality, refocus accreditors on student outcomes, and strip access to federal funds from low-performing institutions.
The Trump executive order focuses on how too many students leave college with heavy debt and poor returns. The White House noted that almost 25% of bachelor’s and over 40% of master’s degrees have a negative return on investment, often leaving graduates “financially worse off and in enormous debt.” Trump’s plan attempts to link student debt and college quality by using accreditation as leverage to protect students and taxpayers from shoddy programs.
How could this shake-up affect student loan borrowers in practice? Accredited status currently functions as a gatekeeper for federal financial aid, according to Reuters, and could impact at least two student loan borrower groups: current students whose schools might lose accreditation under more demanding standards and future students who could benefit from higher-quality programs, lower default risks, fewer debt without degree cases, and even downward pressure on college costs.
Trump Executive Order On Student Loan Accreditation Reform: Potential Impact On Current Borrowers
Tighter accreditation standards could mean some colleges with subpar outcomes would be at risk of losing their accreditation (It is worth noting that, at least currently, very few schools lose accreditation, per Higher Ed Dive). What happens if a college loses accreditation? Its students lose access to federal aid. Accreditation and federal financial aid go hand-in-hand, and an institution must be accredited to receive federal student loans and Pell Grants.
If a school fails to meet the new higher bar and loses accreditation, it immediately becomes ineligible for federal aid. That means current students can no longer receive Pell grants or federal student loans to pay for tuition. According to Accredited Schools Online, this would have an immediate, practical effect on students’ finances.
For current students, a loss of accreditation would likely be financially devastating. Many would likely have to scramble to cover tuition through private loans or out-of-pocket since federal aid would dry up. Private loans often carry higher interest and stricter credit requirements, so not all students can obtain them.
In many cases, a college that loses accreditation may ultimately close. Students at such colleges could find themselves with interrupted educations and still on the hook for the student loan debt they’ve already incurred. Even if the school stays open without accredited status, any credentials earned would be unaccredited, limiting their value in the job market or for graduate school. Credits may not transfer easily either, especially after accreditation is lost , so students who wait too long to move could lose progress toward a degree.
In practical terms, losing accreditation means losing aid, which puts current students in a bind. A student midway through their program might suddenly be unable to afford to continue, effectively derailing their college career. They could be left with student loans without a degree, a worst-case scenario in higher education. Such students face an elevated risk of default; borrowers who don’t graduate are nearly three times as likely to default on their loans as those who earn a degree, according to a post on Medium by Jack Redmondi, the former president and CEO of Navient.
This is the exact outcome Trump’s accreditation reform seeks to prevent for future students, but the transition could be rocky for those currently enrolled in at-risk institutions. Colleges and regulators would need to manage teach-outs and transfers carefully to protect these students from ending up with debt but no diploma. Otherwise, the debt without a degree crisis (i.e., students stranded with loans and no credentials) could worseneven as longer-term fixes are implemented.
Trump Executive Order On Student Loan Accreditation Reform: Potential Benefits For Future Borrowers
Looking beyond the immediate disruptions, Trump’s accreditation overhaul could benefit future student loan borrowers. By enforcing stronger standards, the hope is to align higher education with better value, which should improve student outcomes. Here are the key ways the student loan accreditation reform might help future borrowers:
Trump Executive Order Could Lead To Higher Quality Programs
Accreditors may be pushed to ensure colleges provide “high-quality, high-value” education, as the executive order put it. Institutions with dismal graduation rates or poor learning outcomes will face pressure to improve or risk losing accreditation. At the same time, the Education Department plans to welcome new accreditors to increase competition, potentially allowing innovative, outcome-driven programs to thrive. The result for future students could be more credible degrees – and fewer low-quality colleges rubber-stamped as legitimate. In short, accreditation reform should strengthen student debt and college quality by steering students toward programs that deliver real value.
Trump Executive Order Could Lead To Lower Student Loan Default Rates
Stronger accreditation standards could translate into lower default rates. If colleges graduate more students into gainful employment, more borrowers can repay loans instead of defaulting. Removing or reforming colleges with chronically poor outcomes means fewer borrowers entering repayment with no degree or worthless credentials. Today’s data show a clear connection between completion and default: Those who fail to graduate account for a disproportionate share of loan defaults, according to Redmondi. The reform aims to curb the conditions that lead to high student loan default rates by boosting accountability for student success. Fewer graduates from substandard programs and fewer dropouts should translate to improved repayment statistics in the coming years and a lower frequency of wage garnishment on defaulted borrowers.
Trump Executive Order Could Lead To Fewer Borrowers With Debt But No Degree
A core goal of the accreditation crackdown is to avoid saddling students with loans and nothing to show for it. Accreditors will now be expected to emphasize student outcomes like graduation rates. Colleges, in turn, will need to invest in student support and degree completion initiatives to meet those benchmarks according to the Trump executive order. Over time, fewer students should take on loans only to withdraw before graduating. Cutting down on these no-degree borrowers is critical, as they currently represent the majority of defaults.
Trump Executive Order Could Lead To Downward Pressure On College Costs
Interestingly, the executive order explicitly calls out credential inflation – requiring extra schooling or costly add-on credentials that aren’t truly necessary – as something accreditors must avoid. By banning practices that burden students with “additional unnecessary costs,” the reform could check the relentless rise of tuition in subtle ways. Suppose accreditors start scrutinizing whether program costs are “reasonable” relative to outcomes (as the order suggests, colleges should offer “high-quality academic programs at a reasonable price”). In that case, colleges may feel pressure to justify tuition hikes. Introducing new accreditors could also foster more affordable educational models, such as accrediting low-cost online or competency-based programs that undercut traditional degrees. Over time, these forces may exert downward pressure on college prices. For future borrowers, that could mean needing to take out smaller student loans in the first place. Coupled with higher completion rates, this reform might improve students’ return on investment and reduce the average debt load per graduate.
The Upshot Of The Trump Executive Order On Student Loan Accreditation Reform
In sum, the Trump executive order targeting student loan accreditation reform seeks to create a virtuous cycle for prospective students: higher-quality colleges, better student outcomes, and less onerous debt. If implemented successfully, it could result in fewer graduates drowning in debt, fewer dropouts, and more affordable programs.