NASFAA Endorses Grothman’s Bill to Give Financial Aid Administrators Authority to Limit Student Loan Borrowing

By Maria Carrasco, NASFAA Staff Reporter

Rep. Glenn Grothman (R-Wisc.) last week introduced legislation that would allow institutions to limit the amount of federal loans that a student can borrow, which Grothman said would help students from overborrowing loans they won’t be able to pay off.

Specifically, the legislation, named The Responsible Borrowing Act, would amend the Higher Education Act of 1965 to allow higher education institutions, at the discretion of an institution’s  financial aid administrator, to prorate or limit the amount of a federal loan a student could borrow for the academic year or in the aggregate. 

The institution would be able to do this if they could demonstrate that student borrowing levels are “excessive” for the program based on data from the U.S. Bureau of Labor Statistics and the College Scorecard. Additionally, there are other scenarios in which loans could be limited, depending on the enrollment status of the student, credential level of the program, and the year of the program. 

Under current law, institutions can only limit student loans on a case-by-case basis using professional judgment, and must document and provide in writing the reason for doing so to the student. In his press release, Grothman said this legislation would give students “guard rails” from overborrowing.

“Far too often, students are borrowing exorbitant amounts of money – more than they need – which can lead to a lifetime of financial hardship,” Grothman said in a statement. “It 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, even disrupting lifelong goals like buying a home or starting a family.”

Institutions are held accountable for student borrowing through measures like cohort default rates and gainful employment, yet may find themselves unable to address these issues because they cannot prevent students from borrowing more than is reasonable based on certain characteristics like program length or expected future earnings.

NASFAA endorsed the legislation, with NASFAA President and CEO Justin Draeger saying it will give financial aid administrators more tools to curb excessive student loan borrowing.

“Federal rules have prohibited financial aid administrators for too long from directly intervening or even requiring additional counseling when students take on too much student loan debt,” Draeger said. “Many schools would welcome the opportunity to ensure students are well-educated about their borrowing and future repayment obligations. There’s a difference between borrowing every dollar you’re offered and borrowing just what you need — and financial aid administrators can play a critical role in educating student borrowers about that balance if given the opportunity.”


Publication Date: 5/22/2023

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