New Republican Bill Would Slash Biden’s Student Loan Forgiveness Plans

A new Republican bill aims to see President Joe Biden’s student loan forgiveness plans repealed.

The legislation, which was introduced earlier this month and so far has not been approved, would end the administration’s programs for debt forgiveness that followed the Supreme Court’s decision last year striking down the president’s original plan for borrower relief.

“The postsecondary education system is spiraling out of control, and Americans are right to question the value of a baccalaureate degree,” Representative Virginia Foxx, who chairs the House’s Education and the Workforce Committee, told Newsweek. “Student loan debt is skyrocketing, and completion rates are plummeting.”

The North Carolina Republican added that there’s bipartisan agreement that lasting reforms are required to improve the federal student loan program.

“The College Cost Reduction Act is a responsible alternative to the Biden administration’s free college agenda, which is placing an enormous burden on students and taxpayers,” Foxx said. “This bill offers reforms to the Higher Education Act that will lower college costs, rein in executive overreach and prevent colleges from endlessly raising the cost of tuition.”

What the Bill Says

The College Cost Reduction Act, or H.R. 6951, would update the federal student loan system so that borrowers would no longer qualify for forgiveness.

Specifically, it aims to repeal “new regulations issued by [the Education Department] related to closed school discharges, borrowers defense to repayment, pre-dispute arbitration, false certification, administrative capability, certification procedures, and ability to benefit,” Republicans said in a fact sheet on the bill.

The law would also prohibit similar Education Department regulations from going into effect in the future unless they are approved explicitly by Congress.

Instead, student loan borrowers would have to choose between a standard 10-year repayment plan and a new plan related to each borrower’s income level.

Essentially, all borrowers under that plan would need to pay 10 percent of their yearly income above 150 percent of the federal poverty rate. This option is less beneficial to borrowers than Biden’s SAVE repayment plan, so many debt holders would see higher monthly bills.

The Republicans’ new plan allows borrowers to see half their payments applied to the loan’s principal as long as they make on-time, monthly payments. This would be true even for payments that don’t cover interest, with the remaining unpaid interest waived.

The plans available today look markedly different than what Republican leaders are proposing. For one, borrowers would not be able to qualify for a “discharge” through their repayment plans unless they’ve repaid the amount of principal and interest owed under the standard 10-year plan.

The current plan offers loan forgiveness after 10, 20 or 25 years of repayment no matter how much you’ve paid.

Under the proposed GOP legislation, a president would not have the power to enact new laws for more affordable repayment plans or student debt forgiveness. Also, the secretary of education would need to “confirm that any new regulations or executive actions issued related to the student loan program will not increase costs to the federal government.”

Any regulations that cannot meet that threshold would be prohibited, the bill says.

There could be some benefits for student loan borrowers if the bill passes, even though it makes student loan forgiveness unlikely.

“The bill is making it easier for students and parents to make better-informed college decisions,” Athena Kan, the CEO of career training platform Dreambound, told Newsweek. “The bill is requiring that schools report out cost and student outcomes per program, instead of just by school.”

Additionally, aggregate student loan limits would be capped at $50,000 for undergraduate students. The limit currently stands at $23,000 (or higher for graduate programs). The federal PLUS programs offered to graduate and professional students and parents would be abolished. And student loan borrowers in default would have a second chance to “rehabilitate” their loans to get back to good standing.

Some student loan borrowers have criticized the Republican bill since it first came out.

For Michael Lux, the founder of the Student Loan Sherpa, an end to the PLUS programs is particularly concerning.

“This approach to lowering the cost of college troubles me,” Lux told Newsweek. “By eliminating the Parent PLUS and Graduate PLUS programs, many students will not be able to afford college. Such a move would only further the divide between the haves and the have-nots. College shouldn’t be a privilege only available to the wealthy.”

Still, Lux said a move to simplify federal repayment is a “good idea.” The specific plan, however, would mean higher monthly payments for most borrowers, he added.

“It appears as though student loan borrowers have become a political football,” Lux said. “As the political winds shift, it will impact the budgets of borrowers, making planning and responsibly repaying debt exceedingly difficult.”

Some borrowers are worried about what the bill means for debt they haven’t paid off.

“Effectively, it doesn’t sound great,” Jack Epner, a 42-year-old Colorado resident with thousands in student loan debt, told Newsweek. “Having payments tied to income makes sense, but I think the rest just sounds a bit harsh.”

Altogether, the problems with a bill like this could be linked to the overall higher education system.

“The true problem, though, which no one seems to be addressing, is the cost of education in the first place,” Epner said, adding that many other countries allow citizens to earn a degree for $2,000 a year.

“I think the whole thing’s a bit of a joke until U.S. citizens are treated like humans and not targets for taking as much money as possible,” he said.

Where Does Student Loan Forgiveness Stand?

Last year, a core piece of Biden’s debt forgiveness efforts was struck down by the Supreme Court. That plan would have had student debt erased for up to $10,000 in loans if borrowers were making less than $125,000 per year.

After that decision, the Education Department approved more than $130 million in student loan forgiveness, as well as a repayment plan called SAVE. SAVE takes into account income and allows more affordable payments and an easier pathway to loan forgiveness, as opposed to the Republicans’ proposed repayment plan.

Biden also put forth a $5 billion plan that would forgive debt for those who work 10 years or more in public service and those who have repaid their loans for at least 20 years and haven’t been able to get help through income-based plans.

Since federal student loan payments resumed last October, many borrowers have been struggling to make their payments. One in 10 borrowers even said they won’t be paying off their loans as a way to defy the system, according to a recent Intelligent.com survey of 1,000 federal borrowers.

Is the GOP Bill’s Passage Likely?

The new Republican bill faces many roadblocks to passage. To get approved, the College Cost Reduction Act would need to first pass the House and then the Senate. In the House, Republicans hold a small majority, but the Democrats’ majority in the Senate means a bill this partisan is unlikely to get passed by Congress/

If the House and Senate were to approve the bill, Biden would be expected to veto it, given that it ends his student debt forgiveness plans.

Beyond the bill’s unlikely passage, though, are signs of what may be ahead on student loan forgiveness if the Republicans gain control of the Senate and presidency in November’s election.