U.S. lawmakers are taking steps toward a significant reform of college financial aid, which could reshape how students borrow money and repay their loans.
On June 10, Republican senators proposed a new version of a bill that would cap student loan borrowing and reduce the number of repayment plans.
This proposal is part of a broader legislative package aimed at cutting federal spending, which includes changes to student loan programs and Pell Grants.
Key Proposals in the Senate Bill
The Senate’s proposal differs from the House version introduced earlier in April, but it still includes major changes to student loan programs.
One of the most notable aspects of the Senate bill is the proposal to set caps on student loan borrowing, especially for graduate students and parents.
These caps would be less extreme than the ones proposed by the House Republicans but would still significantly affect how much students can borrow.
Another major change in the bill is the reduction in the number of student loan repayment plans.
The Senate bill proposes limiting the options to just two repayment plans, eliminating programs like President Joe Biden’s Saving on a Valuable Education (SAVE) plan.
The SAVE plan, touted as one of the most affordable options, has been delayed in court, leaving millions of borrowers in limbo.
While the Senate version is considered more moderate than the House proposal, it still includes provisions that could make borrowing for higher education more difficult and potentially push students toward riskier private loans.
Melanie Storey, president of the National Association of Student Financial Aid Administrators, expressed relief that some of the more harmful provisions of the House bill were removed, but she still raised concerns about the affordability of college under the new system.
Pell Grant Adjustments
The Pell Grant program, which provides federal assistance to low-income students, has also been a target for reform.
In the House version, lawmakers proposed increasing the number of credits students need to take to remain eligible for Pell Grants.
This change could have caused two-thirds of Pell Grant recipients to lose their funding or see their awards reduced.
However, the Senate’s version takes a softer approach, aiming to exclude higher-income students from qualifying for Pell funds but still providing some expansion to the program.
Despite this, critics like Sameer Gadkaree, president of The Institute for College Access & Success, warn that the Senate’s expansion of Pell eligibility to unaccredited programs could harm students.
Gadkaree argues that these programs may not lead to good job prospects and could waste valuable resources.
Accountability for Colleges
The Senate bill introduces new accountability measures for colleges that differ from the House’s approach.
While the House bill proposed fining colleges whose students struggle to repay their loans, the Senate bill focuses on taking away federal financial aid from programs that do not show successful outcomes for graduates.
This means colleges would need to prove that their graduates are earning more than those without a degree in order to keep receiving financial aid.
This proposal has garnered bipartisan support, as many agree that students should not incur debt for degrees that do not lead to better-paying jobs.
However, the provision may face challenges in the Senate, as it could conflict with the strict rules for budget bills, which only allow changes that directly affect federal spending or savings.
Challenges and Concerns
The reforms to student loans and financial aid are not without their challenges. There are concerns about rushing major changes through without fully understanding the potential long-term effects.
As Jon Fansmith from the American Council on Education noted, complex policymaking may be too difficult to manage under the rushed process that Republicans are using to pass the bill.
By pushing the bill through using budget rules, lawmakers aim to avoid needing support from Democrats, but they may face difficulties with the details of the legislation.
The proposed reforms to college financial aid are part of a broader effort to reduce federal spending.
While the Senate version is seen as a more moderate approach compared to the House’s aggressive plan, it still introduces significant changes that could impact millions of students.
As the bill progresses through Congress, there will likely be more debates about how to balance student access to higher education with fiscal responsibility.
