Here’s the reprint from the Association of Certified College Funding Specialists:
House Republicans’ proposal would cut back loans, tighten repayment options and let for-profit colleges become 100 percent federally funded
WASHINGTON — A bill proposed by Republicans in the House of Representatives could change the college-financing system dramatically, moving billions of dollars out of financial aid programs.
If H.R. 4508, becomes law, college affordability would go from bad to worse, say many higher education experts, and students from low-income backgrounds would suffer most.
According to an analysis by the nonpartisan Congressional Budget Office, the net loss of funds to students over the next 10 years would be almost $15 billion if the bill is enacted as written. Other analysts say that figure would be even higher.
The bill, known as the Promoting Real Opportunity, Success, and Prosperity through Education Reform (PROSPER) Act, would also make more money and regulatory flexibility available to for-profit colleges, many of which have been cited for high costs, low graduation rates and a history of taking advantage of low-income students and military veterans.
“If enacted, it would decimate the loan repayment safety net for low-income borrowers,” said Ben Miller, senior director for postsecondary education at the Center for American Progress, a left-leaning think tank. “It would expose students to unscrupulous actors, especially in the for-profit space. And it would do nothing to actually address the real problems we have around completion and equity.”
The Higher Education Act, first passed in 1965 and revised periodically, regulates how the federal government financially assists postsecondary institutions and students. It governs how federal student loans are distributed, who is eligible for federal financial aid, how loans must be repaid and which institutions can receive federal money. The PROSPER bill was moved out of committee by House Republicans in December. The Senate is holding hearings to develop its own version.
With the national student debt hovering around $1.3 trillion, lawmakers, parents, and students have been crying out for a fix to the higher education lending system.
But many see the new bill’s proposed fixes as harmful to those who most need the boost toward the middle class that comes with a college education. For some, it would make college less affordable altogether; for others, it would add to the debt burden they would carry after college.
To meet its stated goal of simplifying the many federal grant and loan programs, the House bill proposes streamlining application processes, which could help students and their families but also be eliminating several of those programs.
Among the proposed cuts are grant programs, including Teacher Education Assistance grants (for those who agree to teach, after college, for four years in a public school serving low-income families) and Federal Supplemental Educational Opportunity Grants (additional grant money for qualified undergraduate students from the lowest income levels).
The bill would also eliminate some loan programs — including a key loan program for graduate students — and some beneficial repayment options. These include the option for some low-income students to extend their repayment plans (without extra interest) and a program that forgives loans after 10 years of repayment for those working in government or nonprofit public-service jobs.
For-profit institutions, conversely, would benefit from the proposed bill because it would eliminate the 90-10 rule, which currently prevents these institutions from receiving more than 90 percent of their revenue through federal financial aid. The rule pushes schools to create programs that enable students to be successful after graduation because some revenue is coming directly from students or employers. Before the 90-10 rule was instituted, for-profit-colleges often enrolled low-income students who had little prospect of earning a degree, obtained those students’ federal grant and loan money, and suffered no consequences when the students dropped out or received a substandard education.
“A for-profit college could be a hundred percent federally funded,” if the PROSPER Act becomes law, Miller said.
The bill would also narrow the eligibility requirements for deferment of loans and require those in certain types of payment plans to pay more than previously expected. For example, the percent of what’s defined as discretionary income that borrowers must pay under an income-driven repayment plan would increase from 10 to 15 percent. And the bill would require even full-time students from low-income backgrounds to pay interest on their federal loans while they are pursuing their degrees. Currently, students are not responsible for any interest while they are in school.
“Undergrad students with low expected family contributions should not have to accrue interest while in school,” said Jean McDonald Rash, chair of the Higher Education Loan Coalition, a group of financial aid professionals who work to improve federal loan programs. She said the group has many concerns about the bill in its current form.
For example, as noted, the new bill proposes ending the Public Service Loan Forgiveness Program, which benefits students who go into nonprofit fields or government work and are not likely to earn large incomes.
“We think that’s very important to attract students into those kinds of fields of study,” said McDonald Rash, who’s also a director of financial aid at Rutgers University.
Some believe that with fewer options from the government to pay for school, students and educators would have to think more carefully about how to finance the cost of a degree. Currently, schools don’t have an incentive to lower their prices because students can use government aid to foot the bill, said Mary Clare Amselem, an education policy analyst at the Heritage Foundation, a right-leaning think tank.
“Overwhelming economic evidence is suggesting that heavily subsidizing federal student loans has led to college tuition increases,” Amselem said. Schools “know that pretty much regardless of what they charge, students are going to be able to find the loans from the federal government.”
Amselem also believes the new bill would push students to borrow from private lenders, which she says is a good thing. “The federal government controls 90 percent of the student loan market, so they’ve virtually crowded out private lenders,” she said. “I think if we had more options for students, we would have a very robust, very competitive market that would offer really great options for students.”
Rep. Virginia Foxx, R-N.C., chairwoman of the House Committee on Education and the Workforce, introduced the new bill in December. It was voted out of committee on straight partisan lines and sent for debate in the full House.
“Our proposals offer the same deal for everyone, regardless of occupation, and put downward market pressure on institutions to keep costs down,” Rep. Foxx said in an emailed statement. “Additionally, the PROSPER Act puts additional funding behind the time-tested cornerstone of financial aid for low-income students: the Pell grant.”
Pell grants are awarded to students most in need; to qualify, family income must usually be below $50,000 a year. The maximum grant for the 2018-19 school year is $5,920. Under the proposed new bill, Pell recipients would receive an additional $300 if they’re taking at least 15 academic credits per semester, a provision designed to encourage people to finish college as quickly as possible.
The Education Trust and 34 other organizations — including the NAACP and the National Association for College Admission Counseling — wrote a letter to several members of Congress in which they said the proposed act “exacerbates the increasing burden of student debt and continued inequity in higher education access and outcomes. It would make higher education less affordable, saddle students with greater debt, and push more students into loan default.”
While a bill this vast — nearly 600 pages — has a number of pros and cons, many say it’s not an even split.
“There’s a couple things here and there that aren’t bad for low-income students,” Miller said, “but they are far outweighed by the litany of items that would hurt them.”
Sen. Lamar Alexander, R-Tenn., chairman of the Senate Committee on Health, Education, Labor, and Pensions, has said he hopes to see a bipartisan version by early spring that can be recommended to the full Senate.