The House version of the reconciliation package in Congress, passed on May 22, marks a long-overdue step toward fiscal responsibility in higher education. The policies in H.R. 1, also known as the One Big Beautiful Bill Act, should encourage students and taxpayers. These include eliminating the inflationary Grad PLUS loan program, placing borrowing caps on Parent PLUS loans, instituting skin-in-the-game requirements for colleges and universities, and rolling back several burdensome and costly Biden-era regulations.
However, the bill leaves key reforms to be adopted.
Lawmakers in the Senate have a critical opportunity to refine the policies in H.R. 1 and close the gaps that leave taxpayers on the hook for debt cancellation, runaway tuition, and unchecked borrowing. Here’s what the Senate can focus on.
An unfortunate, unintended consequence of subsidizing college tuition is that colleges raise tuition even higher. The House bill proposes $50,000 annual and $200,000 lifetime caps on federal student loans. This policy could be improved by lowering the lending cap to $30,000 for undergraduates and $40,000 for graduate students, with an annual lending cap of $7,500 for both populations.
Streamlining federal loan programs into a single option with more responsible annual and lifetime borrowing limits will tend to initiate more lending from the private market, reduce overall student debt, and put pressure on colleges and universities to take responsibility for controlling rising costs.
The House version creates a “Repayment Assistance Plan” to replace current income-driven repayment plans. However, this plan still allows for loan cancellation after 360 payments, waives unpaid interest, and allows some non-payments to count as payments. But debt doesn’t disappear; it just shifts to taxpayers.
The better policy is to raise borrower payments to 15% of income above 100% of the poverty line and eliminate debt cancellation altogether. Allowing borrowers to enroll in an income-driven repayment plan will enable them to better manage their debt load in a responsible manner, but cancellation should not be a default feature of the system. Only a court-approved bankruptcy should cancel debt.
Expanding Pell Grants to short-term, high-quality, workforce-aligned programs is a welcome improvement. But tying eligibility to programs approved by the state workforce board under the Workforce Innovation and Opportunity Act duplicates the existing Individual Training Accounts program and risks excluding other high-quality options.
Instead, Congress could expand Pell grant eligibility to align with policies similar to the Professional Pell Education Learning (PROPEL) Act, which would allow students to use these funds for enrollment in vocational or technical training, flight training, apprenticeship, or other on-the-job training programs. Programs would no longer have to be accredited, and taxpayer dollars would be aligned with educational opportunities that meet workforce needs.
The House version rightly ends Public Service Loan Forgiveness eligibility for medical and dental residents, who can expect high earnings and already benefit from other state and federal partnership programs that provide loan repayment for clinicians working in rural or underserved areas. But the Senate shouldn’t stop there. It’s time to wind down the program entirely.
At the least, Public Service Loan Forgiveness should have a cap on the amount of the debt that could be canceled. The Congressional Budget Office has predicted that capping the loan forgiveness debt cancellation at $57,000 (this is the most an undergraduate can borrow in direct unsubsidized loans) would produce savings of up to $12.5 billion over 10 years.
Eliminating the program altogether would be even better. Privileging some workers over others, regardless of income, is unjust. Besides, borrowers already have access to income-driven repayment plans that are affordable by definition and that currently include loan cancellation.
Today, more than 42 million borrowers owe the federal government more than $1.6 trillion in student debt. Just 38% of them are making payments. Meanwhile, public trust in higher education is collapsing. The House reconciliation bill takes many valuable steps toward reforming American higher education, but in the area of student debt, the Senate now has a chance to build on that progress and deliver even more accountability while helping students borrow, spend, and repay reasonable amounts.
If the bill caps excessive borrowing, simplifies repayment, prioritizes workforce-ready education, and ends open-ended loan forgiveness, this part of the bill will truly be beautiful. Colleges must be held accountable for the prices they charge and the value they provide.