In response to a directive to cut $330 billion in mandatory federal education spending over the next decade, the House Education and Workforce Committee has proposed a reconciliation package projected to save taxpayers approximately $350 billion—surpassing the target by $20 billion. This part of the reconciliation bill, passed at the end of April, now moves to the House Budget Committee before heading to the full House.
The policies in the proposal mark a major step towards restoring accountability in higher education, not only to help students but also to improve the institutions that serve them. These policies will overhaul student loan options, ensure that colleges and universities have a substantial financial stake regarding their students’ future success and debt load, and limit future executive action.
Such efforts have been a long time coming and represent a welcome change after the Biden-Harris administration’s largely failed efforts to fundamentally reshape the higher education system and unlawfully cancel billions of dollars in student loans—with no regard for how the expensive, unfair largesse would affect the American taxpayers who already paid off their loans or decided a four-year degree wasn’t the right option for them.
The House Education and Workforce Committee’s package lays the groundwork for a more responsible, transparent, student-centered higher education system.
Instead of continuing to allow students to borrow essentially unlimited amounts under the PLUS loan program, students will have caps on how much they can borrow. Regarding the Parent PLUS loan program, parents will only be able to take out an additional $50,000 on behalf of their student after their child has already borrowed the maximum amount allowed. The bill also sunsets the Graduate PLUS program, which essentially allows graduate students to borrow up to the cost of attendance.
PLUS loans have been particularly inflationary because colleges and universities have continued to jack up their tuition, and the program rules to date have let graduate students and parents take out unsustainable sums.
With 42.7 million borrowers owing more than $1.6 trillion in student debt, and only 38% of borrowers in repayment and current on their student loans, it has been well past time to do something to address this crisis. Winding down Grad PLUS and setting a loan cap on Parent PLUS will restore accountability for student debt, protect taxpayers, and give students self-confidence and clarity about their ability to graduate with manageable debt loads.
For the first time, colleges and universities will begin to have real “skin in the game” and face consequences if students fail to repay their loans or complete their degrees. Starting with loans disbursed after July 1, 2027, colleges that participate in the federal student loan program will have to pay back a portion of the due, but unpaid student loans of their alumni (unless a student is part of an exempted group outlined in the legislative text), particularly for academic programs with a high cost but low financial return.
The college’s repayment obligation is determined by how expensive the program was for students, how much extra money (if any) students earn after finishing, and how many students drop out. If colleges fail to pay their share on time, they will pay interest on the late amount, and they could ultimately lose access to federal student aid if they continue to fail to make payments. This risk-sharing will be required for participation in Federal Student Aid programs.
This policy, as a result, will encourage institutions to phase out low-value programs, because if a college voluntarily shuts down a failing program for at least 10 years, it will only have to pay back half what it owes for that program’s due, but unpaid student loans.
Another very welcome set of policies in this legislation will prohibit new attempts at widespread debt cancellation via executive action, limit the Secretary of Education’s ability to implement economically significant regulatory changes, and roll back several burdensome and costly Biden-era regulations.
Regulations such as “Gainful Employment” (setting financial benchmarks for graduates) and the “90/10 rule” (limiting the proportion of income from federal aid programs) have unfairly targeted for-profit schools while ignoring similar or worse outcomes at public and nonprofit institutions.
The bill also repeals expansions to “Borrower Defense” (permitting massive debt cancellation through dubious processes) and closed-school discharge rules (another backdoor loan forgiveness scheme) that created huge and open-ended liabilities for taxpayers.
The policies in this bill represent a culmination of many higher education reforms that conservatives have advocated for over a decade. The committee’s proposals, such as a loan cap on Parent PLUS, eliminating Grad PLUS and rolling back unfair regulatory practices, coupled with limits on the secretary’s authority to issue regulations or executive actions that are economically significant and expensive, are precisely what America needs to ensure the responsible stewardship of taxpayer dollars and better outcomes for all students.