02.07.18

By: Danielle Douglas-Gabriel
Source: Washington Post

CBO Estimates Show House Higher Ed Bill Could Hit Student Loan Borrowers Hard

College students would lose $15 billion in federal student aid over the next decade if House Republicans succeed in turning their higher education bill into law, according to a report released Tuesday by the nonpartisan Congressional Budget Office.

The Promoting Real Opportunity, Success and Prosperity through Education Reform Act, sponsored by Reps. Virginia Foxx (R-N.C.) and Brett Guthrie (R-Ky.), aims to overhaul the federal law governing almost every aspect of higher education. The 590-page bill cleared the House Committee on Education and the Workforce in December, without hearings and despite calls from the higher education community for more input and time to analyze the legislation.

Democrats on the committee, who were cut out of drafting the bill, have slammed the legislation for slashing some student aid programs, while funneling more federal dollars to controversial for-profit colleges.

“The CBO’s score confirms what we already knew to be true – this bill makes college more expensive for America’s students and working families,” said Rep. Bobby Scott (D-Va.), ranking member of the House Education Committee. “The bill forces students to borrow more and then pay more to repay their loans.”

The legislation has garnered mixed reviews. Some policy analysts and student advocates have praised it for using grants to provide incentives for students to graduate in four years, for eliminating student loan origination fees and for expanding work-study opportunities for low-income students.

“The reforms within the PROSPER Act are necessary to provide students with a high-quality education, and fix a system that has not been serving their needs,” said Michael Woeste, a House Education Committee spokesman. “Not only have we been able to put forward major reforms that improve the postsecondary education system for students like the expansion of Pell grants . . . but we have shown that those major reforms can be done while still being fiscally responsible.”

But some worry the bill could raise the cost of college for students who can least afford it by no longer paying the interest on low-income students’ loans while they are in school and limiting their repayment options once they graduate.

Ending that interest subsidy for the neediest students will save the federal government $18.5 billion over the next 10 years, but giving that same population more grant aid will increase spending by $7.3 billion during that time. Eliminating origination fees on student loans would also increase spending on the program by $14.5 billion, according to the CBO.

Ultimately, the bill would result in $14.6 billion in spending reductions overall to mandatory programs such as student loans.

The most significant savings will come at the expense of federal student loan borrowers, especially those banking on some form of debt forgiveness.

The legislation, much like the White House budget, would eliminate Public Service Loan Forgiveness. That program wipes away federal student debt for people who take jobs in the public sector after they have made 10 years’ worth of payments. Though people already enrolled in the program would still qualify, ending loan forgiveness for future borrowers would save $25 billion over the next decade.

Another $15 billion would be saved by curtailing the federal income-based repayment program. As it stands, borrowers can restrict their monthly student loan payments to 10 percent of discretionary earnings, with the balance of the debt forgiven after 20 to 25 years. House Republicans would limit loan forgiveness, raise monthly payments to 15 percent of income and eliminate the fixed number of years for repayment.

Limiting loan forgiveness could address some concerns about the cost of income-driven repayment plans. A report released last week by the U.S. Department of Education’s inspector general said the federal government is on its way toward lending more money to borrowers than they repay because of soaring enrollment in the program.

The amount of student loans being repaid through the plans jumped between the 2011 and 2015 fiscal years. As a result, the government is expected to subsidize the repayment plans by $11.5 billion for 2015 loans, an increase from $1.4 billion in 2011, according to the audit.

The audit builds on a 2016 Government Accountability Office study that estimated the popular repayment plans would cost at least $108 billion for loans made from 1995 to 2017. Both bits of research could bolster the case for restricting the program, though student advocates argue that the programs are the most effective ways of preventing borrowers from defaulting on their loans, a problem that would also cost taxpayers money.

“It’s infuriating for students to watch Congress prioritize help for corporations and the wealthiest people in America while they continue to wait years for help achieving the American Dream,” said Reid Setzer, government affairs director at the millennial advocacy group Young Invincibles. “Congress should listen to these students when trying to reshape the law to better reflect their needs.”

Advocacy groups are hopeful the Senate will take a more bipartisan approach in drafting its version of the education bill, which reauthorizes the Higher Education Act of 1965.

The Senate Health, Education, Labor and Pensions Committee has held hearings on the law in recent weeks, with committee chair Sen. Lamar Alexander (R-Tenn.) aiming to have a bill ready for debate and amendments in early spring. But he and ranking member Sen. Patty Murray (D-Wash.) are at odds over how colleges should be held accountable for student outcomes and the role of the federal government in higher education. Still, policy experts anticipate Alexander will work with Murray to craft legislation, given their bipartisan approach to reforming K-12 education.