As the Biden administration moves closer to a final decision on whether to erase billions in student loan debt, House Republicans have presented an alternative proposal.

The bill would reform aspects of the federal student loan system, including simplifying repayment methods, decreasing the impact of interest and establishing new borrowing limits. Republicans have long argued that President Biden lacks the power to enact sweeping student loan cancellation, and that debt cancellation would do little to reform the system that put students in debt in the first place.

It would also allow Pell Grants to be used for short-term programs, like technical training and workforce development.

The bill comes as a government watchdog, the Government Accountability Office, released a report last week that the federal student loan system has cost the federal government billions of dollars instead of generating revenue. income, as the current administration has argued. Republicans believe Biden’s campaign promise to enact massive student loan debt forgiveness would continue to drive up costs and that the student loan program should be reformed as a whole.

The Responsible Education Assistance through Loan Reforms (REAL) Act is unlikely to win support in the Democratic-controlled House of Representatives, particularly because it would bar the Biden administration from issuing new student loan regulations. if they increased costs to the federal government, including massive debt relief.

The bill has also been rejected by some who argue it would worsen the student debt crisis instead of reforming it. Sameer Gadkaree, president of the Institute for College Access and Success, said in a statement: “This proposal would exacerbate the crisis in college affordability and directly harm millions of current and future students. It would make student loans more expensive, restrict access to education for students from low-income backgrounds, and extend federal funding to programs that offer a low return on investment.

President Biden has said he plans to unveil his debt relief plan by the end of the month, just before the current pause in loan repayments expires. Although the president remains undecided on his final plan, a recent Politics The article reported that the Department of Education is ready to present Biden’s debt relief plan as soon as the president gives a thumbs up.

Recent White House deliberations have included a $10,000 student debt cancellation plan per borrower, capped at those with annual incomes below $150,000. However, no plan has been finalized. “The Biden administration has engaged in mass student loan forgiveness behind Americans’ backs without congressional authorization. In total, to date, the President has already forgiven, waived or canceled at least $217 billion in student loans by illegally misusing his executive pen,” Representative Virginia Foxx of North Carolina said in a statement on the project. of law. The bill was introduced by Foxx as well as Representatives Elise Stefanik of New York and Jim Banks of Indiana.

“Unlike Democrats’ massive student loan forgiveness program, these reforms provide targeted relief to borrowers who need it most and recognize that not all career paths require a bachelor’s degree,” the Republican lawmakers said.

When asked what tools Republicans plan to use to stop Biden from writing off student loan debt, a staffer on the House Education and Labor Committee, of which Foxx is the most senior member importantly, said that while they are exploring options, their options are limited given the Democratic majority in Congress.

Simplify reimbursement

Borrowers must navigate an often confusing bureaucracy when it comes to identifying a repayment plan that best suits their current income. There are currently four different income-based repayment plans that borrowers can choose to enroll in to lower their monthly student loan payment based on their income.

The Republican bill would reform two types of IDR regimes: income-contingent reimbursement and income-contingent reimbursement. If a borrower is enrolled in an income-contingent plan, the bill would prevent the borrower’s debt from exceeding the principal amount of the loan, and after 10 years of repayment, interest on any federal student loan would be forgiven.

Borrowers would pay 15% of their discretionary income for the loan and would be required to pay a minimum of $25 per month. Borrowers would not have to demonstrate financial hardship or fall below a certain income bracket to enroll.

Additionally, the bill would eliminate interest capitalization, an effort the Biden administration proposed in July.

It would also allow borrowers to qualify for loan forgiveness once the borrower has made payments equal to their principal plus 10 years of interest and any interest accrued during a loan deferral.

Borrowers who find it difficult to cover their interest after being in repayment for 10 years would have their interest waived, allowing the borrower to make payments on their principal loan amount. Interest would continue to accrue for the remainder of the borrower’s repayment term.

Loan limits

Republicans have argued that borrowers should not be able to take on excessive student loan debt for programs that do not generate enough graduate income to cover their student loan debt. The bill would establish loan limits for graduate borrowers, prohibiting graduate students from withdrawing more than $25,000 per year and no more than $100,000 for the duration of their program.

According to 2021 data from the Education Data Initiative, the average federal student loan debt incurred by graduate students is $91,000.

The bill would also eliminate Graduate PLUS loans, which allow graduate students to borrow up to the full cost of attending their program, and the Civil Service Loan Forgiveness Program, which provides relief. debt to borrowers working in public service jobs, such as teaching, nursing or military service, after making 120 installments. As of June 2022, $8.1 billion in student debt had been canceled for 145,000 borrowers through PSLF.

Amy Scott, associate vice president of government relations and public policy at the Council of Graduate Schools, said, “The proposed elimination of [Graduate PLUS loans] for new borrowers would not only discourage potential students from pursuing higher education, but could have a negative impact on meeting national and local labor demands that require a graduate degree.

It would also allow college financial aid offices to limit the amount of debt a student can incur, both at the undergraduate and graduate level. Colleges may flag certain programs as producing “excessive debt” based on factors such as salary results or length of program.

Limits of executive power

The Republican bill would prohibit the Biden administration from using executive power to enact massive debt cancellation. It would also tie Education Secretary Miguel Cardona’s hands, preventing him from making changes to the federal student loan program that would increase costs to the federal government.

Last Friday, a Government Accountability Office report was released which found that over the past 25 years the federal student loan program has actually cost the government $311 billion, while the Department of Education said it earned the government $197 billion between 1997 and 2021. Republicans expressed outrage at the report’s findings.

“However you look at it, the claim that the federal government is ‘taking advantage’ of student borrowers is false. Taxpayers lost hundreds of billions of dollars to this program,” a group of Republican lawmakers said in a statement on the report.

The legislation would also prevent Cardona from extending the current pause in student loan repayments, issuing waivers to federal student loan programs (like the PSLF waiver, which is currently set to expire Oct. 31), and issuing new repayment plans. .

Pell Workforce Grants

The bill would allow Pell Grants to be used for short-term programs. To qualify, the program must offer at least 150 hours of study over eight weeks, have a placement rate of at least 70%, and provide graduates with an income greater than the cost of attending the program. program two years after completion.