Student loans: This is what the GOP proposes to fix college debt crisis
To provide a counter to President Biden’s student loan forgiveness plan, Senate Republicans have released their own, which they argue tackles the root of the problem.
Millions of student loan borrowers are currently awaiting the verdict of the US Supreme Court regarding the legality of President Biden’s proposal to forgive a portion of their debt, ranging from $10,000 to $20,000. At the same time, Republicans in Capitol Hill are proposing their solution to tackle the student debt crisis. The Lowering Education Costs and Debt Act combines five bills from five GOP Senators into one package. Those who introduced the legislation are Senators Bill Cassidy (R-LA), Chuck Grassley (R-IA), John Cornyn (R-TX), Tommy Tuberville (R-AL), and Tim Scott (R-SC).
Treating a college degree as a commodity
Instead of regulating the predatory student loan industry, these five proposed bills aim to provide borrowers with more transparency regarding the amount of debt they may incur while pursuing higher education. This group of legislators views a college degree as a marketable commodity, unlike many political leaders in other high-income nations that prioritize access to higher education or technical training as equally important as primary and secondary education.
Several GOP leaders have expressed their belief that institutions of higher learning use student loans to artificially inflate prices, with the understanding that the government will provide the necessary funds in the short term. However, the relationship between the cost of obtaining a degree and the expansion of access to student loans is far more complex than suggested by these five lawmakers. It is true that the cost of education has risen as more students have taken out loans to support their studies. Yet, it is important to note that there are also more students pursuing college degrees today than there were in the latter half of the twentieth century. This implies a greater cost for educational institutions that must hire more professors and staff, expand facilities, build more housing, and invest in programs that will attract students to their campus over those with similar offerings.
What is included in the bill?
The College Transparency Act (CTA), included in the package’s initial bill, requires colleges and universities to publicly disclose a comprehensive range of data on “student success and outcomes.” This measure aims to provide potential students with more information to compare higher education institutions when deciding where to enroll. Senator Cassidy clarified that the bill would not necessarily lower prices, but it would “increase transparency, improve the student loan program, and strengthen accountability measures in a fiscally responsible way.” Transparency in the education sector is crucial, especially for young borrowers who struggle to understand future payment obligations, but it does not mean that prices will fall as a direct result.
Senator Grassley has introduced the Understanding the True Cost of College Act, which includes a provision for colleges and universities to provide a “uniform financial aid letter” to prospective students. This would offer a clear breakdown of the scholarships, work-study options, and loans being offered, helping families to compare offers from different institutions. However, like Senator Cassidy’s component, a standardized way to compare prices will only reduce costs if the offers are different.
Senator Steve Daines’ proposal, the Informed Student Borrowing Act, aims to provide students with clear and concise information regarding their loans. While the Act does not directly impact pricing, it does require that students receive information about the duration of their loan, their expected monthly payments, and the potential earnings they can expect after completing their chosen program and attending their university of choice. However, the legislation does not specify how earnings data will be collected, and there may be variations in income between graduates with the same degree who attended different universities. Additionally, many other factors can influence one’s salary, so relying solely on the degree may not provide as much transparency as the Senators had hoped.
The two final components are the Streamlining Accountability and Value in Education (SAVE) for Students Act, proposed by Senator Cornyn, and the Graduate Opportunity and Affordable Loans (GOAL) Act, proposed by Senator Tuberville. The initial proposal aims to simplify the repayment process for borrowers by reducing the number of available plans from nine to two. The two programs would be the 10-year standard repayment plan and REPAYE+, which is “an income-driven repayment plan that provides earlier forgiveness for low-income, low-balance undergraduate borrowers.” To meet the need of the millions of borrowers who have taken out student loans, these programs would need to be scaled up in an unprecedented way. Brookings reported that in the years since the 10-year income-based repayment plan was made available to borrowers, few had used it, and many who were qualified were never enrolled, even in cases where they would have been eligible for loan forgiveness.
Senator Cornyn’s bill would also prevent the federal government from providing loans for undergraduate programs where at least 50% of former students are unable to earn a salary higher than the median high school graduate. The same rule would apply to graduate degrees, with earnings compared to those with a bachelor’s degree. This proposal may encourage students to pursue STEM fields while discouraging the pursuit of humanities or art degrees. It’s intriguing how Republicans, who strongly support the concept of meritocracy in the United States, seem to be comfortable with limiting certain academic opportunities to those who can afford them instead of allowing the most qualified individuals to pursue those fields of study.
The last bill claims to bring “inflationary Graduate PLUS loans” by placing limits on the amount that students can borrow and “allows institutions to set lower loan limits by the program to protect students from over-borrowing.” However, setting a limit on how much a student can borrow means that if a student wants to study a program that may have a lower borrowing limit, they will have to finance their education themselves or seek a private loan which is often come with a very high-interest rate. Moving students from the public loan sector to the private is not a way to alleviate the debt crisis and could exacerbate the already precarious situation.