A report released by the CBO estimated that the PROSPER Act could cause college students to lose $15 billion in federal student loans if passed.
On Tuesday, the nonpartisan Congressional Budget Office released a report evaluating the costs of the PROSPER Act. The report estimated that if passed, this bill could cause college students to lose $15 billion in federal student loans over the next ten years.
The PROSPER Act is the House Republicans’ attempt to reauthorize the Higher Education Act. The bill made it through the House Committee on Education last December but not without its share of controversy.
Democrats on the committee argued that the legislation cuts student aid programs while giving more money to for-profit colleges. According to Representative Bobby Scott, the CBO’s report is more proof of what House Democrats already knew. Scott added, “The bill forces students to borrow more and then pay more to repay their loans.”
However, according to committee spokesman Michael Woeste, the changes made in the PROSPER Act are necessary to help students and “…fix a system that has not been serving their needs.” Woeste added that the bill will provide necessary change and do so in a fiscally responsible way.
Overall, the bill has gotten mixed feedback with some higher education advocates singing its praises and others staunchly opposing it. Some higher education advocates like that the bill expands work-study programs, offer students added incentives for graduating in four years, and gets rid of student loan origination fees. But others worry that passing the PROSPER Act will limit many borrower’s options for repaying their loans upon graduation.
Many of the cuts made in the bill come at the expense of borrowers who are counting on some form of debt forgiveness. For instance, the bill would eliminate the Public Service Loan Forgiveness program, saving the government $25 billion over the next ten years. PSLF gives total loan forgiveness to borrowers who work in the public sector and make qualified loan payments for ten years.
The PROSPER Act saves the government another $15 billion by cutting back on income-based repayment plans. However, a report that was released last week showed that due to the high number of borrowers enrolling in these plans, income-based repayment plans could soon cause the government to begin losing money on their student loan portfolio.
The PROSPER Act now moves to the education committee in the Senate, where many higher education advocates are hoping for a more bipartisan approach to the bill. Senator Lamar Alexander, the committee chair, has stated that he hopes to have a final bill ready by April.
One important note to make is if this PROSPER Act actually does limit federal financial aid. It could do one of several things. Students will either go to less expensive schools, they'll forgo college, or they'll rely on private loans to cover tuition.