Sens. Young, Shaheen introduce bill to address student debt crisis

U.S. Sens. Todd Young (R-IN) and Jeanne Shaheen (D-NH) introduced legislation to address the mounting student debt crisis in America.

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The Student Protection and Success Act seeks to increase higher education institutions’ accountability for their students’ ability to repay their loans and mandates that institutions have a vested interest in the success of their students.

“Our Student Protection and Success Act will help ensure colleges and universities are preparing hard-working students for meaningful careers that will better enable graduates to repay their student loans,” Young said.

According to the U.S. Federal Reserve, student loan debt has more than doubled in the past two decades, yet there has been little done about how to address affordability for the long term.

“The skyrocketing cost of college – and subsequent student debt – has become a barrier for too many young people who want to pursue higher education to achieve their career and life goals,” Shaheen said. “By increasing accountability measures for loan repayments, institutions of higher education have to keep their promises to borrowers and empower graduates to succeed after graduation. This bipartisan bill will help address the alarmingly high cost of higher education and better ensure college affordability for the long-term for our students.”

The Student Protection and Success Act would reform the eligibility standard for federal student aid. Currently, institutions’ access to federal student aid is based on a school’s cohort default rate, which is the percentage of students who default on their federal loans over a given timeframe after going into repayment. However, this metric does not consider a complete picture of students’ ability to repay their loans.

This bill would include a cohort repayment rate metric in this eligibility standard, such that schools with less than 15 percent of students repaying their loans would be deemed ineligible for receiving Title IV student aid.

Further, it would require higher education institutions to pay a risk-sharing fee to the Department of Education based on a percentage of their students’ unrepaid loan balance. This provision requires schools to have “skin-in-the-game” and share responsibility in the success of their students. Under this section, institutions pay a fee equal to a percentage of the loan balance that is not being repaid to the U.S. Department of Education. This fee will be pegged to the unemployment rate, ensuring that schools pay smaller fees during economic downturns.

This bonus payment is designed to reward institutions that serve a significant number of low-income students. The payments will be entirely funded through revenue gained from the risk-sharing provision and allocated based on the number and percentage of Pell grant recipients enrolled in an institution, their repayment rates and the school’s spending on student services.
Full legislative text is available here.