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Julie Ryder Lammers
This month’s changing of the guard in Washington, DC sets the stage for lawmakers to tackle a number of higher education financing issues, whether through the stalled reauthorization of the Higher Education Act, standalone bills or the reversal of regulations enacted during President Obama’s time in office. While it’s difficult to predict what a Trump administration will mean for higher education, here’s our Consumer Advocacy Center’s wish list of executive and legislative priorities in the best interest of the higher education consumer:
1. Protect student loan consumers by increasing financial education, maintaining recently enacted rules, and improving accreditation. One idea that both sides of the aisle can get behind is improving the financial life skills of college students so they can better handle the debt that comes with a college education these days. Congress should support the Empowering Students Through Enhanced Financial Counseling Act, which would require higher education institutions to replace entrance student loan counseling for first-time federal student loan borrowers with annual counseling. It would likewise expand the requirement to include federal Pell Grant recipients and parent PLUS loan borrowers. Policymakers also need to closely watch ED’s experiment with loan counseling to see what lessons can be learned there.
Additionally, gainful employment and borrower defense to repayment regulations should be allowed to stand. These were hard-fought regulations battles that granted a slew of new and improved protections for student loan consumers who were defrauded into borrowing for a shoddy education, as well as penalties for “bad actor” schools. In the same vein, we’d like to see lawmakers do all they can to restore integrity to the accreditation process. At a time when we are seeing many thousands of students incurring substantial financial damage as a result of their desire to achieve a higher education, too often accrediting agencies have been the rubber stamp for federal aid at predatory higher education institutions.
2. Keep federal student loans federal. There’s been much speculation that a Republican-held Congress and presidential administration could mean a return of student lending to private banks. A reversion back to something akin to the Federal Family Education Loan Program (where private lenders provided the capital for student loans backed by federal government subsidies and the guarantee of repayment in the case of default) is highly unlikely, though. Banks are loath to lend to 18-year-olds with no credit without some sort of incentive from the government, and the government is loath to provide that incentive because it can lend to students directly at less cost.
A more likely scenario, however, could be the dissolution of the federal parent and graduate PLUS program – the argument being that parents and students pursuing advanced degrees are less worthy of federal subsidies and the private sector is in the best position to meet their needs as consumers. But this could be a path fraught with peril; in our experience, private loan borrowers often have the most problems with repayment due to higher interest rates and less flexible payment plans. And let’s not forget that private lenders by and large froze their student lending during the last recession, resulting in the government’s stepping in and providing liquidity to ensure no disruption to the loan program. We should be very careful about pumping private education loans back up to their previous volume, lest we return to the “wild west” of private education loans where anything goes and access to education can be threatened by economic tides.
3. Streamline income driven repayment plans and continue public service loan forgiveness – sensibly. President-elect Trump’s plan to modify income based repayment, so that payments are capped at 12.5% of discretionary income and forgiven after 15 years, could be a win for consumers. However, there needs to be a serious streamlining of all the different income driven plans (IBR, PAYE, REPAYE, ICR, etc.), instead of just adding one more to the mix. Additionally, Public Service Loan Forgiveness should be continued as the benefit to society it was intended to be. Concerns over PSLF’s cost to the budget could be handled with the caps proposed by the Obama administration.
4. Increase public investment in higher education. Any tuition-free or debt-free initiative, or free community college, on the federal level is probably dead on arrival with the incoming administration. But individual states can still show the way forward, such as the recent proposal in New York of free tuition at state colleges and universities for students from families earning less than $125, 000 annually. We hope more states and municipalities follow their lead; after all, the best form of debt relief for the student loan borrower is not having to take a loan in the first place.
5. Support employer participation in loan repayment. One piece of the student loan solution – one that could benefit those already struggling with debt and be much cheaper for the federal government than free college – is employer assistance with student debt. In fact, several bills, including the Employer Participation in Student Loan Assistance Act, the Student Loan Employment Benefits Act of 2016, the HELP for Students and Parents Act and the Student Loan Repayment Assistance Act of 2015, already have been filed that would create tax incentives for employers to help employees pay down and manage education debt. While these bills have yet to pass either full chamber of Congress, more employers lately have been offering student loan assistance as a workplace benefit, and some states are also starting to move on their own legislation.