Republican lawmakers on the House Education and Workforce Committee unveiled a plan Tuesday to overhaul the federal student loan system, with changes that include new caps on borrowing and forcing schools to reimburse the government for loans in default.
The legislation, which is also aimed at offsetting the cost of extending President Trump’s tax cuts, will reduce federal spending by $330 billion, according to the GOP-led committee.
“For decades, Congress has responded to the student loan crisis by throwing more and more taxpayer dollars at the problem — never addressing the root causes of skyrocketing college costs,” Chairman Tim Walberg (R-Mich) said in a statement.
“Colleges have ridden this gravy train of taxpayer dollars without any accountability for the quality of the education they provide or whether students can find jobs when they graduate,” the congressman added. “This plan brings accountability and holds schools financially responsible for loading students up with debt.”
If passed, the bill would impose a borrowing limit of $50,000 in federal student loans for undergraduate students starting on July 1, 2026, while graduate students will be limited to borrowing $100,000 and professional students will be capped at $150,000.
Current limits depend on several factors but have allowed undergrad, grad and professional students to take out as much as $57,500, $138,500 and $224,000, respectively.
Students would also be required to borrow the maximum amount they can before parents would be allowed access to the Parent Plus loan program, which the committee described as “predatory,” under the bill. Parent PLUS loans currently allow parents to borrow up to the “cost of attendance” for their children.
As part of the bill’s “skin in the game” initiative, colleges and universities would be forced to pay “a portion of their students’ unpaid loans.”
The percentage will be based on “how much of a return on investment the degree provided,” according to a fact sheet released by the committee.
“Institutions that continue to saddle their students with debt eventually face increasing penalties and risk loss of access to federal student aid,” the House Education and Workforce Committee warned.
The plan eliminates unemployment deferment and economic hardship deferment for federal student loan borrowers and “streamlines the litany” of repayment plans into just two: a fixed repayment plan and an income-driven repayment plan.
A host of “burdensome and costly” Biden-era repayment and loan forgiveness options will be scrapped under the proposal.
Pell Grant recipients will also be forced to enroll in more classes – 30 hours each academic year, up from 24 hours – in order to receive the financial aid.
The Pell Grant program will also be offered to individuals enrolled in short-term workforce training programs under the proposal.
Walberg said the overhaul will ensure “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,” the congressman said.
