House Panel Passes GOP Bill Cutting Loan Subsidies For College Students

Chris Radburn/PA Wire

WASHINGTON (AP) — A Republican bill that would eliminate key loan subsidies for college students and give a boost to for-profit colleges has passed the first major hurdle in the House of Representatives.

The bill, a rewrite of the nation’s main law governing higher education, passed the House Committee on Education and the Workforce late Tuesday after more than 10 hours of debate. Democrats complained that the bill was rushed through the committee just two weeks after it was introduced without giving them a fair chance to review and amend it.

But committee chairwoman Virginia Foxx, a North Carolina Republican, said the legislation “delivers the serious reforms needed to empower students and families to achieve an essential part of the American dream: earning a high-quality education, finding a good-paying job, and living a successful life.”

The bill would eliminate the interest subsidy on loans for students while they are in college. The American Council of Education estimates the change would affect 6 million students and that would have the effect of increasing students’ interest payments by 45 percent for a four-year degree and 87 percent for a four-year degree followed by a master’s program.

“It is a bad bill for borrowers,” said Terry Hartle, senior vice president at the American Council on Education. “We are increasing the cost of college for students.”

Hartle added that with more debt to repay after college, students will have to make more difficult decisions regarding what careers to pursue and whether to attend graduate school, get married and start a family.

“Educational debt affects post-college personal and professional choices: it’s careers, it’s graduate school, family formation, marriage; this would exacerbate that problem because students will be paying more money in educational debt every month,” he said.

The bill would also do away with the Public Service Loan Forgiveness program, which was begun in 2007 with the aim of motivating university graduates to take government and teaching jobs in remote rural areas. Under the program, the remainder of a student’s debt is forgiven after he or she makes 120 qualifying payments, or typically after 10 years. The bill would eliminate this program for new borrowers, while those already in the program would be grandfathered in.

The bill also would strike two Obama-era regulations that protect students who are defrauded by for-profits colleges: the gainful employment provision, which requires career programs to provide students an education that would enable them to repay their debts, and the borrower defense regulation, which boosted student protections against fraud by for-profit institutions. The Education Department is now rewriting those rules and it’s unclear how that process will be affected by the bill.

“It is somewhat surprising how brazen the bill is in terms of reducing accountability and providing more taxpayer dollars to for-profit colleges without any strings attached,” said Clare McCann, a higher education expert with the New America think tank. “The bill went out of its way to limit any kind of accountably for profits.”

In a measure that enjoys broad support, the bill simplifies the process of applying for federal student aid. Students now are required to complete a cumbersome, 10-page long form, which may present an additional difficulty for low-income and first-generation students.

It was unclear when the bill would be considered by the full House. The Senate is now beginning to work on its own version of the bill.