House Democrats on Thursday unveiled a proposal that aims to lower the costs of higher education for both current and future student loan borrowers by making key investments as well as overhauling components of the repayment system.
Rep. Bobby Scott (D-Va.), chairman of the House Committee on Education and Labor, touted the measure as a companion action to President Joe Biden's debt cancellation announcement, and said the House bill would aim to ensure that the root causes of the student debt crisis are not repeated.
Specifically, the Lowering Obstacles to Achievement Now (LOAN) Act, would double the federal Pell Grant by increasing the maximum award over a five-year period to $13,000. It would also alter the Public Service Loan Forgiveness (PSLF) program by shortening the time to forgiveness and codifying the limited PSLF waiver set to expire on Oct. 31, 2022.
"As NASFAA has said time and again, widespread loan forgiveness of any kind should also come with comprehensive reforms to the student loan system to prevent borrowers and taxpayers from ending up in the same position in the future," NASFAA President & CEO Justin Draeger said in a statement. "One of the most effective ways to do that is to provide substantial, upfront investments for need-based student aid programs, such as the federal Pell Grant program. Doubling the maximum award would make up for necessary investments that have been pushed off for far too long, restore purchasing power for low-income students, and provide a long-term option to address college access and affordability issues."
The bill would also address affordability issues and expand access to subsidized loans, limit capitalization of interest, and create a safety net for vulnerable borrowers. It would also lower interest rates by tying the rates for all new federal student loans to the 10-year Treasury note, but ensuring that no new loan will have an interest rate higher than 5%. Currently, interest rates are tied to the 10-year Treasury note, plus a fixed add-on percentage. Interest rates are capped at 8.25% for subsidized and unsubsidized undergraduate loans, at 9.5% for unsubsidized loans to graduate students, and at 10.5% for PLUS loans.
"The LOAN Act is the next step we must take to confront the student debt crisis," Scott said. "Simply put, by making loans cheaper to take out and easier to pay off, the LOAN Act will help improve the lives of student loan borrowers — both now and in the future."
The bill also has the endorsement of House Speaker Nancy Pelosi (D-Calif.) who said the package's goal is to ensure that access to higher education remains open to students from all backgrounds.
"Building on President Biden's historic student debt relief, this legislation will help widen the path to prosperity: giving graduates more room to breathe and empowering future students to pursue their dreams," Pelosi said. "As we continue our fight to put People Over Politics, House Democrats will never relent in ensuring that every American can thrive in the 21st Century."
The legislation comes on the heels of House Republicans offering their own student loan reform package, the REAL Reforms Act, which Rep. Virginia Foxx (R-N.C.), ranking member of the House Education and Labor committee, pledged to make her caucus' priority should they reclaim the chamber after the midterm elections in November.
Both of these pieces of legislation will likely serve as the parties' top agenda items for the new Congress that will be sworn into office in the new year, and will also shape the discussion over the chamber's higher education policy debate.
Publication Date: 9/15/2022