By Maria Carrasco, NASFAA Staff Reporter , Hugh T. Ferguson, NASFAA Senior Staff Reporter
Editor’s Note: For a deeper analysis of the House Republicans’ proposal, see this companion article from NASFAA Senior Policy Analyst Jill Desjean.
House Republicans are championing a new proposal to bring targeted reform to the sprawling student loan portfolio, while at the same time challenging their Democratic counterparts to do the same, rather than allow the administration to tinker with the student loan system through executive authority.
In recent months, Republicans have grown increasingly critical of the Biden administration’s attempts to rework the student loan system, with the administration continually touting its consideration of broadscale student loan forgiveness. Republicans have also lambasted the Department of Education (ED) for not responding to a number of requests concerning student loan budget projections, Federal Student Aid’s (FSA) influence on the servicing landscape, reviewing the department’s drafted rules, as well as getting a clear summation of the executive authority being used to implement changes to the loan system.
Republicans have instead crafted their own loan reform proposal — the Responsible Education Assistance Through Loan (REAL) Reforms Act — that would, among other things, place caps on the overall amount any borrower would repay on their loans, make a number of adjustments to income-driven repayment (IDR) plans that would offer more targeted relief to borrowers, and give schools the authority to limit loans for populations of borrowers in certain circumstances. The bill would also create a short-term Pell Grant program, allowing eligible students to access Pell Grants for programs as short as 150 clock hours. Alarmingly, the bill would also eliminate the Public Service Loan (PSLF) program for new borrowers and dramatically decrease the amount of federal loans available to graduate students.
The bill was introduced by Rep. Virginia Foxx (R-N.C.), ranking member of the House Education and Labor Committee; Rep. Elise Stefanik (R-N.Y.), House Republican Conference chair; and Rep. Jim Banks (R-Ind.), Republican Study Committee chairman.
“The Biden administration has been engaging in mass student loan forgiveness behind Americans’ backs without the authorization of Congress,” the lawmakers said in a statement. In total, to date, the President has already forgiven, waived, or canceled at least $217 billion in student loans through the unlawful abuse of his executive pen. Instead of placing the burden of this broken student loan system on the shoulders of American taxpayers, we are introducing this bill to fix the system.”
The lawmakers used the unveiling of the package to counter efforts to implement broad-scale student loan debt cancellation that Republicans say would not address issues within the current loan portfolio that will continue to leave future borrowers vulnerable to the repayment system.
“We’re pleased to see thoughtful proposals included in this legislation that would provide targeted support for struggling borrowers, as well as much needed changes to the way the student loan repayment system operates, through streamlined repayment plans, caps on the overall amount borrowers repay, and granting schools the authority to curtail excessive borrowing in certain limited circumstances,” said NASFAA President and CEO Justin Draeger.
NASFAA, in a recent report, has sought to fill the gaps in the conversation surrounding student loan reform by providing thoughtful, systemic, and targeted policy solutions to address underlying flaws in the repayment and servicing systems that lead borrowers into financial hardship.
“We are, however, alarmed by the proposal to eliminate the Public Service Loan Forgiveness program, which encourages students to pursue careers for the betterment of our country,” Draeger added. “What’s more, eliminating the Grad PLUS program — creating a net effect of lower overall annual and lifetime limits on borrowing for graduate and professional students — would significantly and negatively impact graduate and professional students.”
The House Republican bill borrows from components of the PROSPER Act, the GOP Higher Education Act reauthorization proposal introduced in 2017.
Specifically, the bill incorporates language from the PROSPER Act that would allow institutions to prorate or reduce annual loan limits institution-wide or by academic program based on certain conditions.
As part of the Compiled Higher Education Act Reauthorization Recommendations, NASFAA recommends that Congress follow this provision of the PROSPER Act, and allow schools to set lower loan limits for specific populations based on academic program, credential levels, or other categories established by the school and allow aid administrators to increase a particular student’s loan from the school’s imposed limit, up to the regular applicable statutory limit, on a case-by-case basis under professional judgment.
A key provision in the newly unveiled House GOP bill would eliminate the Grad PLUS program, which serves graduate and professional students, and the PSLF program. Foxx and other Republicans have previously criticized the Grad PLUS program for allowing graduate students to borrow funds to cover expenses up to cost of attendance after a minimal credit check.
The bill would raise annual graduate and professional unsubsidized Direct Loan limits to $25,000, but would lower the aggregate limit to $100,000 for this population. The limits would apply to all graduate and professional borrowers, including those enrolled in health professions programs who currently enjoy higher annual and aggregate limits.
Additionally, the bill would eliminate the entire PSLF program. Earlier this year, ED made administrative changes to the program using a temporary waiver of some statutory and regulatory requirements, which resulted in forgiveness for tens of thousands of student loan borrowers. ED is also proposing to reform PSLF permanently via the negotiated rulemaking process.
The bill would also narrow down the choice of repayment plans to two — a standard 10-year plan and an income-driven plan.
Additionally, the bill would create limitations on authority of the secretary of education. A provision from the bill states the secretary wouldn’t be able to issue proposed rules, final regulations, or executive actions if the rule, regulation or executive action is “economically significant,” meaning that it would have an annual cost of $100 million or more, or affect a sector of the economy.
By unveiling the legislation before the August recess, Republicans are offering a clear framework for their higher education agenda as members turn to the midterm elections this fall. If Republicans control the U.S. House in 2023, as recent polls suggest, it is expected that the REAL Act would be used as a starting point on student loan reform.
Meanwhile, student loan borrowers are still waiting for the Biden administration to issue an announcement concerning the student loan payment pause that is slated to expire at the end of August, as well as issue new regulations on income-driven repayment options.
“As with any federal student aid changes, we will be examining closely whether any proposed programmatic changes result in budgetary savings, and urge lawmakers to ensure those savings are reinvested back into the student aid programs, through Pell Grant increases or other borrower benefits that lower the overall cost of student loans,” Draeger said.
Publication Date: 8/4/2022
David S | 8/5/2022 1:33:24 PM
Nice of them to cherry pick some low hanging fruit that's been in numerous bills already, but the fact that the press release they put out couldn't get through the first paragraph without accusing President Biden of breaking the law makes me skeptical about whether or not their chief priority is helping students.
And then I see that they want to eliminate PSLF and force grad students into the private loan market, and I see that my skepticism is quite well founded.
Jacob M | 8/5/2022 12:39:08 PM
Major choice is probably not influenced by PSLF, but I am sure many people are encouraged to enter into the public service sector (state/local government, non-profits, public universities) knowing that their loans would be forgiven after 10 years. These types of jobs are often not high paying, but that is a sacrifice one is able to make knowing that their loans will eventually be forgiven.
James C | 8/5/2022 8:41:30 AM
The elimination of GRADPLUS is a bad idea especially for medical and law school students who will be forced into private loans or unable to secure private loans. As far as PSLF, is there any evidence students make choices on majors based on PSLF? I think most students are skeptical about the program. All loan repayment should be based on income with caps on how long you pay. The biggest beneficiaries of PSLF are doctors working at not for profit hospitals who have low payments during residency and then get their loans forgiven after 10 years while earning high income. That's not who the program was intended to help. https://www.wsj.com/articles/u-s-student-loan-program-proves-costly-1448042862
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