As Congress works to reauthorize the Higher Education Act, the choices it makes on federal student loans are more important to students and families than ever before. Each year, over seven million undergraduate students take out federal loans. For many, borrowing to go to college may be the best investment of a lifetime. But others struggle to afford monthly payments, and each year more than one million students default on their loans.
In December, the House Committee on Education and the Workforce passed, along party lines, a bill to overhaul the Higher Education Act. The PROSPER Act would make ambitious and far-reaching changes to federal student loans, perhaps more than any other single piece of legislation since federal loans were first created. Despite its recognition of the need to simplify income-driven repayment (IDR) plans and efforts to improve loan counseling, the PROSPER Act would make college debt substantially more expensive and more risky for students.
The PROSPER Act includes a host of problematic provisions that will make it both harder and costlier for students to earn a high-quality certificate or degree. It will increase the cost of borrowing for students by charging interest while students are enrolled and pushing students towards riskier private loans. While it pursues the worthy goal of streamlining income-driven repayment (IDR) plans, its approach will force all borrowers to pay more, and the lowest income borrowers to make payments for a much longer time, potentially for the rest of their lives. At the same time, the bill eliminates student protections against low-quality or even fraudulent colleges – rules designed to protect students and taxpayers from investing time and money into colleges that overcharge and under-deliver – and makes it harder for harmed students to get back on their feet. These changes to accountability only increase the risk that students will default on their loans, and increase the burden taxpayers must shoulder for underperforming schools.
Each day this week, TICAS will publish a new post as part of a series called How the PROSPER Act Stacks Up for Student Debt. Topics will include:
- ONE Loan Proposal
- Student Loan Repayment
- Loan Counseling and Consumer Information
- College Accountability
- Consumer Protections
Each post will explore how specific major changes proposed by the PROSPER Act will affect student debt, including how much students have to borrow, how much they have to repay, and how likely it is that they end up in default. The posts will also discuss better ways – many with bipartisan support – to solve some of the problems the bill aims to address, and describe how Congress can make the most of this key opportunity to help students graduate and reach their goals without overly burdensome debt.