Bridging the $8 Billion Funding Void: Why Schools Must Act Now

Federal student loan policy changes are set to disrupt higher education financing in a major way. With the elimination of Grad PLUS loans and the capping of Parent PLUS loans, an estimated $14.91 billion in federal loan funding will disappear — and even after accounting for private lending and limited school payment plans, a staggering $8.08 billion gap remains.

This gap isn’t abstract. It’s the difference between students enrolling and walking away. And unless institutions act quickly, the fallout could be devastating for both students and schools.

The New Funding Gap

Here’s what the numbers tell us:

• Grad PLUS loans eliminated: A critical lifeline for graduate and professional students vanishes.
• Parent PLUS loans capped: Families can no longer borrow up to the full cost of attendance.
• Partial coverage from private lenders (40%) and school payment plans (5.8%) still leaves more than $8 billion unmet.

Source: FSA Direct Loan Program Loan Volume Portfolio

Why Delay Is No Longer an Option

For colleges and universities, this isn’t a distant policy debate — it’s an enrollment emergency. Without action, institutions will see:

• Sharp declines in access as students lose federal funding options
• Lower persistence rates as financial gaps force students to stop out mid-program
• Increased revenue volatility as tuition dollars tied to PLUS borrowing disappear

The bottom line: Every semester you wait to address this, enrollment and retention risk grows.

The Opportunity for Institutions

Institutions have a chance to turn this crisis into a strategic advantage. By creating flexible, school-funded financing programs, colleges can:

Increase Enrollment Yield

Offer affordable, no-cosigner or income-based loans to students who can’t access other funding, ensuring they enroll and stay enrolled.

Boost Graduation Rates

Cover past-due balances and close affordability gaps, keeping students on track to finish their programs and protecting tuition revenue.

Reduce Discount Rates

Replace grant or gift aid with outcomes-contingent financing. Turn what would have been an expense into a recoverable receivable, reinvesting repayments into future students.

How Clasp Can Help

Clasp provides end-to-end support to help schools launch high-impact institutional lending programs without the operational burden:

• Precision underwriting and compliance oversight
• Enrollment- and cash flow–aligned forecasting
• Real-time ROI tracking and analytics
• Lifecycle servicing and collections management

The result? A sustainable financial aid solution that drives enrollment, improves retention, and protects your bottom line.

Get the Full Guide

Our Bridging the $8B Funding Void Guide breaks down the policy shifts, quantifies the funding gap, and outlines actionable strategies for higher ed leaders to close it.

Ready to start building?

Schedule a strategy session to discuss:

• Impact management strategies
• Student default projections
• Cash flow planning and cohort forecasting
• Navigation of new federal earnings test requirements

Reach out to us at schools@clasp.com — let’s build something great.