The podcast examines the Trump administration's decision to cap federal graduate student loans at $21,000 per year, a policy rooted in the Bennett Hypothesis, which posits that reducing student aid will compel colleges to lower tuition. The episode tests this theory by analyzing a natural experiment from 2006, the Grad PLUS Loan Program. Evidence is mixed: a Texas study found that for every additional loan dollar, graduate tuition rose by 64 cents, supporting the hypothesis. However, a national study of business, medical, and law schools found no direct link except at for-profit colleges. The new caps are expected to primarily affect 30% of borrowers at expensive schools like NYU and USC, potentially pressuring them to lower tuition, but also reducing enrollment, especially among lower-income students. The policy also includes a 'do no harm' provision that could cut federal loans to programs whose graduates don't out-earn high school graduates.