9 min read
Lower loan limits. Fewer repayment options. A 30-year path to forgiveness. New Pell restrictions.
Those are among the major changes coming to the federal student lending program under measures Republicans included in their sweeping tax and budget bill that passed the House early Thursday.
The legislation is designed to rationalize the government’s famously convoluted education loan program while saving around $351 billion. Unlike the current system, the overhaul would require pretty much every borrower — including the lowest earners — to at least make small payments toward their loans, and they would have a narrower chance of getting their debt canceled.
“It’s no secret that colleges have exploited the availability of uncapped federal lending and generous forgiveness programs to raise prices rather than improve access and affordability,” Rep. Tim Walberg, who chairs the Education and Workforce Committee, said at an April 29 hearing. “Streamlining loan options as done in this bill will increase affordability for students and families as well as curtail the extent to which schools use taxpayer dollars to line their pocketbooks by loading students up with debt they can’t repay.”
But some outside experts have suggested that the reforms, including a complicated new system for determining how much students can receive in aid each year, could end up making aspects of the loan program more confusing for families, while also limiting access to federal aid for many lower-income students.
Here are the key things to know.
The student loan program has become notorious for its baffling array of repayment plans, which have accumulated over time as previous administrations have stacked new, more generous options atop one another. Those choices have been made messier by federal court rulings that blocked all or parts of some plans over the past year. President Biden’s SAVE plan, for instance, is entirely on hold, as are the loan forgiveness features of Pay As You Earn and its successor, REPAYE.
The GOP bill would prune the system to just a pair of options — one standard plan, and one linked to income — both designed to make monthly payments manageable for borrowers.
The new standard plan would still require fixed monthly payments. But instead of automatically being placed on a 10-year repayment schedule, like in today’s program, former students would have between 10 and 25 years to pay down their debts depending on how much they borrowed — similar to how federal consolidation loans work today.
9 min read
Lower loan limits. Fewer repayment options. A 30-year path to forgiveness. New Pell restrictions.
Those are among the major changes coming to the federal student lending program under measures Republicans included in their sweeping tax and budget bill that passed the House early Thursday.
The legislation is designed to rationalize the government’s famously convoluted education loan program while saving around $351 billion. Unlike the current system, the overhaul would require pretty much every borrower — including the lowest earners — to at least make small payments toward their loans, and they would have a narrower chance of getting their debt canceled.
“It’s no secret that colleges have exploited the availability of uncapped federal lending and generous forgiveness programs to raise prices rather than improve access and affordability,” Rep. Tim Walberg, who chairs the Education and Workforce Committee, said at an April 29 hearing. “Streamlining loan options as done in this bill will increase affordability for students and families as well as curtail the extent to which schools use taxpayer dollars to line their pocketbooks by loading students up with debt they can’t repay.”
But some outside experts have suggested that the reforms, including a complicated new system for determining how much students can receive in aid each year, could end up making aspects of the loan program more confusing for families, while also limiting access to federal aid for many lower-income students.
Here are the key things to know.
The student loan program has become notorious for its baffling array of repayment plans, which have accumulated over time as previous administrations have stacked new, more generous options atop one another. Those choices have been made messier by federal court rulings that blocked all or parts of some plans over the past year. President Biden’s SAVE plan, for instance, is entirely on hold, as are the loan forgiveness features of Pay As You Earn and its successor, REPAYE.
The GOP bill would prune the system to just a pair of options — one standard plan, and one linked to income — both designed to make monthly payments manageable for borrowers.
The new standard plan would still require fixed monthly payments. But instead of automatically being placed on a 10-year repayment schedule, like in today’s program, former students would have between 10 and 25 years to pay down their debts depending on how much they borrowed — similar to how federal consolidation loans work today.
