At the end of a pivotal House Education Committee, the PROSPER Act, a new Higher Education Act, passed on to be considered by full House of Representatives. The PROSPER Act would change accountability for colleges and universities, alter the student financial aid landscape, loosen restrictions for both short-term and for-profit programs, and more.
In terms of student loan programs, there are many changes on the table. Two big changes include ending the subsidization of student loan interest for certain Stafford loans as well as cutting the Public Service Loan Forgiveness program.
Additionally, the student financial aid system would only offer one type of grant and one type of loan for all students. Repayment plans would be cut down significantly. Instead of nearly ten different repayment scenarios, only two repayment options would be available: a ten-year standard plan and an income-based repayment plan.
Loan disbursement would be altered as well. As opposed to individuals receiving blocks of funding at the start of a school year, loan and grant disbursements would be doled out on a monthly basis.
For those who are already enrolled in different Income-Driven repayment programs, public service loans forgiveness programs, or have subsidized student loans, there is no need to worry about losing these benefits. The bill would allow these borrowers to retain their program benefits. However, new borrowers would be stuck with the new options if they were to pass into law.
Notably, certain oppositionist groups are not impressed at the speed of the process. From the time the legislation was implemented, the committee passed the legislation of the 542-page bill in just over a week. This did not include any input from associations such as the American Council on Education or the American Association of Community Colleges and the Association of Community College Trustees.
So what is next? Well, the bill needs to go to Congress, and pass that red tape to be implemented. Although these changes would mean mass changes within the student loan industry, there is no certainty the bill will make it through the House or Senate.
Thus, the future of student loans lies in the hands of the Democrats and Republicans. The uncertainty is not a good thing for those who are ending school or just taking loans out, but it is going to be a situation that continues to develop over the next several months. The Trump administration is looking for a win in Congress, and the Prosper Act could be that win that starts some positive momentum on the Hill.