Republicans Release Plan to Overhaul Student Financial Aid System

Republicans on the House Education and Workforce Committee on Monday released a plan to overhaul the nation’s financial aid and student loan system, which they say will reduce spending by $330 billion to help pay for President Trump’s tax cut agenda. The committee held a markup session for the proposal today.  

Some highlights: 

* The proposal would impose a $50,000 borrowing cap on federal student loans for undergraduates ($100,000 for graduate students) starting in 2026, pushing more students into the private loan industry; 

* Four income-driven repayment loan repayment plans would be consolidated under a single set of rules, effectively eliminating President Joe Biden’s SAVE plan, which has been hung up in the courts, and borrowers would need to make payments for 30 years, up from the current 10-20 years, to be considered for forgiveness; 

* The option to claim unemployment and economic hardship deferments would be eliminated for federal student loans disbursed after July 1, 2025;

* The rules for Pell Grants, which target lower-income families, would be tightened, requiring students to be enrolled 30 academic hours per year rather than 12 hours per semester. The grants would also be made available to more people in workforce training programs, and the program would receive $10.5 billion to stave off a funding shortfall; 

* Colleges and universities would face “skin-in-the-game accountability” through new rules requiring institutions to repay the federal government a portion of non-performing loans taken out by their students; schools could also be rewarded for how well they do graduating low-income students. 

Dueling views: Committee Chairman Tim Walberg, a Republican from Michigan, said the proposal takes aim at the “gravy train of taxpayer dollars” that many conservatives believe are responsible for driving up the cost of higher education. “This plan brings accountability and holds schools financially responsible for loading students up with debt,” he said in a statement. “The bill also includes other reforms that will lower costs for students and families while ensuring the fiscal sustainability of targeted programs like the Pell Grant. Bottom line, it’s time to fix this broken cycle that is costly to taxpayers and leaves students worse off than if they never went to college.”

Higher education advocates were less enthusiastic. The plan would leave “students at much higher risk of being exploited by the industry, making loans more expensive, reducing access to grants,” Jessica Thompson of The Institute for College Access & Success, a non-profit that advocates for lower cost and broader access in education, told The Washington Post. “This bill could drag us back 50 years by restricting access to higher education to people who have financial means.”