Market Data 
Topline
Republicans with the Education and Workforce Committee voted to advance an education reform measure Tuesday, potentially sending to the GOP-controlled House a proposal that looks to eliminate some student loan repayment plans, place limits on how much federal money students can borrow and make eligibility changes for Pell Grants.
Key Facts
The measure, which has been dubbed the Student Success and Taxpayer Savings Plan, was revealed Monday by Rep. Tim Walberg, R-Mich., who claimed the legislation would save the government over $330 billion and reduce the federal deficit.
Walberg said the measure will better serve Americans by “strengthening accountability for students and taxpayers, streamlining student loan options, and simplifying student loan repayment.”
The proposal passed the committee in a 21-14 party-line vote and will go to the Budget Committee before being considered in the House.
Get Forbes Breaking News Text Alerts: We’re launching text message alerts so you’ll always know the biggest stories shaping the day’s headlines. Text “Alerts” to (201) 335-0739 or sign up here.
How Does The Student Success And Taxpayer Savings Plan Impact Pell Grants?
Pell Grants, which provide financial aid to lower-income students and were awarded to 31.6% of undergraduate students in the 2022-2023 school year, will become less accessible. The plan looks to change “full-time” student Pell eligibility from 12 semester hours each academic year to 30 semester hours. Students enrolled less than half-time (six credits per semester) under the plan will also be ineligible for the Pell Grant.
What Are The New Proposed Borrowing Limits For Federal Student Loans?
New borrowing limits on federal loans will also be implemented under the plan, which would introduce a $50,000 limit for undergraduate students, a $100,000 limit for graduate students and a $150,000 limit for students seeking professional degrees (e.g. doctorates and juris doctors). Under the measure, parents could only take out federal loans if their child maxes out their borrowing limit and still has remaining costs.
What Changes Are Proposed For Student Loan Repayment Plans?
The plan would limit student loan repayment plans to two options—down from the seven borrowers have as of now. One option is a tiered repayment plan that makes it so students with less than $25,000 in federal student loan debt would repay their debt for no more than 10 years. Students with $25,000 to $50,000 in debt would repay the debt for no more than 15 years, while students with $50,000 to $100,000 would repay for no more than 20 years. Those with over $100,000 in debt would repay for no more than 30 years. The other option is an income-driven repayment plan based on borrowers’ total adjusted gross income.
What Other Student Loans Are Impacted By The Student Success And Taxpayer Savings Plan?
Graduate students would lose access to the Plus loan program under the measure, which also seeks to remove subsidized loans that allow undergraduate students’ interest to be paid by the government while they are enrolled in school.
Contra
Jessica Thompson, senior vice president at the Institute for College Access & Success, told The Washington Post, “Across the board, they are making repayment significantly more expensive and more difficult,” adding the change “could reduce the number of people who enroll.”
Key Background
The Trump administration, which is looking to move student loans to the Small Business Administration, has sought to reverse the relief given to student loan borrowers by former President Joe Biden, who forgave over 5 million federal student loan borrowers a total of $183.6 billion. The Trump administration announced last week that student loan collections will resume on defaulted student loans starting May 5. The types of loans included in the resumption are Federal Family Education Loans, Direct Loans, Perkins Loans and more. Over 5 million student loan borrowers are in default on their loans. Defaulted loans have not been collected since March 2020, when the COVID-19 pandemic began in the United States.
Further Reading
Trump Admin Resumes Defaulted Student Loan Collections May 5—Impacting Millions Of Borrowers (Forbes)
Trump’s Presidency And Student Loans: What Move To Small Business Administration Means For Borrowers (Forbes)
