Republican bill would cap student borrowing, make colleges liable for unpaid loans


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Dive Brief:

  • Rep. Virginia Foxx, chair of the House Committee on Education and the Workforce, introduced a wide-ranging legislative package Thursday meant to reshape the student loan system and reduce college costs.
  • Known as the College Cost Reduction Act, the proposal would put colleges on the hook for loans their former students don’t pay off, place caps on how much students could borrow for their education, and pare down federal student loan repayment options.
  • The act would also limit the U.S. Department of Education’s power to implement new student loan forgiveness programs and roll back several of the agency’s recent regulatory changes, including the gainful employment and 90/10 rules. Foxx, a Republican from North Carolina, has strongly opposed the Biden Administration’s attempts to forgive mass amounts of student debt.

Dive Insight:

While there’s still compelling evidence that a college degree improves individuals’ financial outcomes, ballooning tuition costs and student loan debt have left many families skeptical of higher education’s worth.

About one-fifth of adults who attended college said the costs outweighed the lifetime financial benefits they received, according to a recent annual survey from the Federal Reserve.

Despite a deeply partisan political climate, legislators often agree on one thing: College costs have spiraled out of control.

“Democrats and Republicans agree that student loan debt in America has reached astronomical levels — the pursuits of students in postsecondary education have been undercut as a direct result,” Foxx said in a statement Thursday. She blamed the skyrocketing debt on the cost of college, which her bill aims to address.

Critics of higher ed often point out that college sticker prices — which only some students pay — are opaque and difficult to compare among institutions. The College Cost Reduction Act would standardize financial aid offer forms that students receive.

Foxx’s proposal would also limit the amount students could borrow to $50,000 for undergraduate programs and $100,000 for graduate degrees. Students enrolled in graduate professional programs could borrow up to $150,000. No student could borrow more than $200,000 in federal student loans in their lifetime.

When repaying loans, students would have two options — an income-driven repayment plan or a 10-year plan structured similar to a mortgage.

The legislation would end two federal grant programs that provide need-based aid to students. It would replace those programs — Supplemental Grants and Leveraging Education Assistance Partnership programs — with performance-based grants for colleges that have low tuition, succeed in graduating low-income students, and offer degree programs that keep pace with market needs.

It would also double Pell Grants for college juniors and seniors who are on track to graduate on time, so long as they are enrolled in “high-return” degree programs.

The legislative package would amend the Higher Education Act, which was last renewed in 2008. The act is supposed to be reauthorized every five years, but it has only received temporary extensions for over a decade.

Rep. Glenn Grothman, author of two of the bills included in the legislative proposal, said Thursday that students often borrow far more money than they need, leading to a lifetime of financial troubles.

“This issue has been brought to my attention by local administrators who are frustrated as they watch students take out money they don’t need knowing that it will serve as a burden down the road,” the Wisconsin Republican said in a statement.

Beth Akers, senior fellow at the American Enterprise Institute, a conservative think tank, praised Foxx’s package Thursday as the largest “serious and comprehensive higher education reform package in decades.”

“It isn’t shy about making big changes and pushing for the system to move back in the direction of providing measurable value to students and taxpayers,” Akers said in a blog post.

But the head of The Institute for College Access & Success, a student advocacy and research nonprofit, expressed concern that aspects of the proposal would instead roll back student and taxpayer protections.

“The bill would also make student loan repayment significantly more expensive for current and future borrowers by increasing monthly payments — likely driving more borrowers into delinquency and default — while removing existing safeguards that protect borrowers from carrying debt for more than 25 years,” said Sameer Gadkaree, president of TICAS.

Gadkaree expressed support for improved clarity around college costs and “common-sense technical fixes” Foxx proposed, such as eliminating interest capitalization in student loans. But he said the troubling provisions would overshadow those elements.

The College Cost Reduction Act would also reduce the U.S. Education Department’s ability to issue new regulations and clear student loan debt.

If the act passed, the education secretary would be required to confirm that any new student loan regulations or executive actions would not raise federal government costs.

It would also roll back rules put in place by the Education Department to monitor the for-profit education industry. Rescinded regulations would include the 90/10 rule, change in college ownership regulations, and the newly released gainful employment rule. The proposal describes these oversight provisions as onerous.

The department would also lose its latest borrower defense to repayment and closed school discharge rules, which the agency uses to clear student debt.



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