New bill could change the way Americans pay for college

Written on Dec 19, 2017

House Republicans want to completely overhaul a federal law that governs higher education in the U.S.

On Dec. 12, lawmakers began debate on the PROSPER Act - which would drastically change the federal aid system and reverse some Obama-era rules aimed at holding colleges accountable.

The changes aim to make it easier for students to pursue "lifelong learning," which Rep. Virginia Foxx, R-N.C., who introduced the bill and is Chairwoman of the Committee on Education and the Workforce, said is not always achieved with a traditional two- or four-year degree.

The bill would expand federal aid available to students pursuing a career or technical degree and free up work-study funds for students working for private companies.

Rep. Bobby Scott, D-VA, said that short-term, for-profit colleges and vocational training programs stand to win the most under the proposed legislation at the expense of students.

The bill would repeal the gainful employment and borrower defense rules that aim to ensure for-profit colleges are offering students a useful education.

He also said provisions in the bill would make college more expensive for students.

Scott made a motion to adjourn the committee's hearing because, he said, the 500-page bill was drafted by Republicans behind closed doors and was introduced just two weeks ago. His motion was denied.

Foxx said she expects the bill to move to the House floor in 2018.

Key changes proposed in the PROSPER Act:

  • Simplify the FAFSA. The bill would make the Free Application for Federal Student Aid available on a mobile app - something Education Secretary Betsy DeVos called for last month. It also would allow more low- and middle-income families to submit a simplified version of the FAFSA.
  • Streamline loans and repayment plans. The bill seeks to narrow the complex federal student aid system to one grant, one loan, and one work-study program. It calls for ending subsidized student loans, which are currently available to some borrowers. Instead, all borrowers would receive unsubsidized loans - which means they would start accruing interest as soon as the funds are distributed rather than when they graduate. But it would also eliminate origination fees for federal student loans. Currently, those fees can range between 1 and 4%. The PROSPER Act also reduces the number of repayment options available for borrowers from eight to two: A standard 10-year plan and one income-based repayment plan. The new income-based plan would extend the amount of time a borrower has to pay back the money, but would only charge them 10 years' worth of interest. Currently, there are eight different types of repayment plans.
  • New limits on borrowing. The bill would increase the amount of money undergraduate students are allowed to take out in federal student loans by $2,000 a year. But it caps how much graduate students can borrow at $28,500 annually and the amount parents can borrow on behalf of their child at $12,500 annually. Currently, graduate students and parents can borrow as much as the cost of attendance.
  • End the public service forgiveness program. Borrowers who work in a public service job can now receive loan forgiveness after paying for 10 years. The bill would end this program for new borrowers.
  • Pell Grant bonus. Pell Grants are worth up to $5,920 a year and are awarded to low-income students. It's money they don't have to pay back. The bill would offer an additional $300 to students who take at least 15 credits a semester for one year, aiming to encourage them to finish their education on time.

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