This week, Congressional Republicans made headlines with their announcement of an extensive set of proposed reforms targeting college and student loans.
As an individual who has been highly critical of the GOP’s recent stance on student loans, I must admit that I was pleasantly surprised by their latest efforts.
Within their comprehensive package, some notable borrower-friendly proposals and ideas have the potential to empower individuals to make informed decisions about higher education. However, there are also some awful ideas that are potentially detrimental to current borrowers and future students.
In this article, I will delve into the details of this proposed legislation, shedding light on the areas that present opportunities for bipartisan agreements.
What’s in the Republican Student Loan Package?
The student loan and higher education reforms come from five new bills:
- The College Transparency Act (CTA)
- The Understanding the True Cost of College Act
- The Informed Student Borrowing Act
- The Streamlining Accountability and Value in Education (SAVE) for Students Act
- The Graduate Opportunity and Affordable Loans (GOAL) Act
Some of these bills have bipartisan support and present a real opportunity to improve our flawed student loan system. Others are clunkers that would devastate borrowers and future students.
The College Transparency Act (CTA)
The College Transparency Act is bipartisan legislation cosponsored by Republican Bill Cassidy and Democrat Elizabeth Warren.
The bill would require detailed reporting on student outcomes including enrollment, completion, and post-college success across colleges and programs.
Adding transparency to the college selection process would be a huge win for borrowers. More information about job placement numbers, starting salaries, and student loan balances is always good.
Sherpa Tip: This is one area where the government has already made some progress. The Department of Education’s College Scorecard is an excellent resource for selecting a school.
The Understanding the True Cost of College Act
This particular act isn’t new, but it’s a good idea.
The objective of the Understanding the True Cost of College Act is to make it easy to compare financial aid offers from schools.
The act would:
- Require colleges to use a uniform financial aid offer form,
- Establish basic minimum information that must be included on page one of the uniform financial aid offer form, and
- Facilitate the creation of uniform definitions of various financial aid terms.
Like the CTA, this proposed legislation isn’t revolutionary, but it adds clarity to a confusing process, which is good.
The Informed Student Borrowing Act
The Informed Student Borrowing Act is another attempt to increase transparency in the federal borrowing process.
This bill would change student loan entrance counseling from a one-time event to a yearly requirement.
It would also require that borrowers review median earnings for their particular program, completion rates, and projected monthly payments for their loans.
Lastly, borrowers must request a specific loan amount rather than having the school handle this calculation.
This is one of those bills that sounds like a great idea in theory, but it might not be so great in practice. Better informing borrowers is a reasonable goal. However, these new requirements could easily become burdensome hurdles that drive borrowers to risky private loans.
Careful implementation would be critical to this bill if it becomes law.
The Streamlining Accountability and Value in Education (SAVE) for Students Act
The SAVE Act is where things will start to get controversial.
On the positive side, it would automate enrollment in income-driven repayment. Under current federal law, automating IDR isn’t allowed, so this would be an improvement for borrowers.
Additionally, it would eliminate the nine current repayment plans and reduce the number to two. In the interest of avoiding borrower confusion, it is a step forward.
However, the terms of those two repayment plans become critically important. This is where the bill transitions from potentially helpful to awful for borrowers.
The 10-year repayment plan, like a cockroach in the apocalypse, survives.
The only other plan becomes the REPAYE+ plan, a new variation on the REPAYE plan. REPAYE+ would help borrowers with smaller balances qualify for forgiveness quicker, count certain deferments and forbearances toward forgiveness, and allow borrowers to make up missed payments to keep progress toward forgiveness.
Unfortunately, there are many downsides to this new plan. For starters, it would prevent the creation of President Biden’s proposed new repayment plan. The Biden plan is far more affordable than the proposed REPAYE+ plan.
The legislation would also prevent the Department of Education from creating new federal repayment plans.
The Graduate Opportunity and Affordable Loans (GOAL) Act
The GOAL Act is where things get ugly.
The stated objective of lowering the price of college is one that everyone can agree upon. College is too expensive, it is driving the student loan crisis, and it needs to get fixed.
However, the proposed legislation is not the answer.
To fix the problem of high education costs, Congressional Republicans want to eliminate Graduate PLUS loans and put restrictive caps on borrowing for graduate students.
The theory is that if people don’t have sufficient federal loans, they won’t be able to afford graduate school, so colleges will have to lower prices.
Pricing people out makes graduate school a privilege available only to the wealthy. If you think our healthcare and legal systems are unfair to the poor, imagine what would happen to those systems if only the wealthy could access medical or law school.
Sherpa Thought: This one is personal to me, and it is hard to be objective. If it weren’t for Graduate PLUS loans and the high borrowing limits, I wouldn’t have been able to attend law school. I wouldn’t have been able to serve my community as a prosecutor, and I wouldn’t be able to help borrowers as the Student Loan Sherpa.
Cutting the cost of higher education has to be a priority, but we can’t do it in a way that restricts access to education.
Will the GOP Legislation Become Law?
President Biden would almost certainly veto the GOAL Act and the SAVE Act. Both acts would also have uphill battles in the Democratically-controlled Senate.
The legislation that creates more transparency in borrowing and school selection has a realistic chance of passage. Even if the particular acts announced this week don’t pass in their current forms, the ideas behind them have broad support. There is a good chance we will see some of these changes happen in the coming years.
Opportunities for Progress
Earlier this month, Republicans passed legislation that would have canceled the one-time forgiveness plan currently before the Supreme Court. Buried in that legislation was language that would have retroactively charged borrowers interest from the student loan payment pause.
The bill was sure to get vetoed by Biden, and it was seemingly crafted to punish borrowers.
In stark contrast, the new legislation package seems like a step forward. Some proposed bills may generate sufficient bipartisan support to become law.
If you have a healthy dose of optimism and squint just right, it looks like there is a chance Congress might make some progress on the student loan crisis.