Congress is expected to reauthorize the federal law governing higher education this year, which would most likely overhaul the federal student loan and work-study programs.
The Higher Education Act of 1965, which is overdue for an update, is the primary law that authorizes federal student aid programs. Last month, GOP members introduced a House bill, known as the PROSPER Act. While some of the provisions introduced in the House bill are unlikely to make it to the Senate floor, experts say there’s movement to change postsecondary education regulations with the HEA reauthorization.
“The Senate version is much more likely to be collaborative,” says Mark Kantrowitz, a college admissions and financial aid expert. “There may be some elements that one side doesn’t like , but they’ll be give and take. In the Senate version, you might not see a repeal of public service loan forgiveness.”
Among the provisions included in the House’s PROSPER Act, these are some proposed changes to federal financial aid that may survive the Senate’s version and affect students in fall 2019.
[Learn how these colleges are offering programs to assist low-income students.]
— Pell Grants: The House’s bill proposes eliminating all postsecondary education grants aside from the Pell Grant. Under PROSPER, the Pell Grant would remain funded th rough 2024 and include a bonus to recipients who enroll in more than a full-time course load. The bonus — $300 — is contingent on a student enrolling in at least 15 credits per semester.
While most students are considered full time at 12 credit per semester, that’s not a heavy enough course load to graduate within four years, college experts say.
“It’s an idea that’s been around for a long time and seems to have support on both sides,” Kantrowitz says. “This gives a carrot more than a stick. It encourages you to pursue full-time enrollment and gives you extra money if you do so.”
— Federal student loans: Under the House’s plan, the federal student loan program would be overhauled into a one-loan system. It would eliminate the subsidized Stafford loan, creating just one federal loan — the ONE loan — to simplify the process with one type of loan. This would also mean the elimination of PLUS loans for parents and graduate students.
“Downsizing the federal PLUS loan program is a major area of focus for House Republicans, who see them as a driving force behind rising tuition costs,” says Stephen Dash, founder and CEO of Credible.com, a multilender marketplace focused on student loans.
[Learn 10 advantages of federal student loans.]
Under the proposed ONE loan program, undergraduates would be able to borrow more and graduates would borrow less.
The new lifetime loan limit for dependent college students would increase to $39,000 — nearly $8,000 more than the current cap. Graduate and professional students would be capped at $150,000 total, while the new lifetime limit for medical students would be $235,500 — roughly a 5 percent increase compared with the current amount.
Jason Delisle, a resident fellow from the American Enterprise Institute, says it’s likely that increasing the undergraduate cap will go through with the HEA reauthorization, since the undergraduate borrowing limit hasn’t increased since 2008.
“With increasing the undergraduate student loan limits — those additional loans could really be used for students living expenses,” says Colleen Campbell, the associate director for postsecondary education at Center for American Progress. But she notes, “The challenge that we end up seeing is we’re increasing loan limits so much and we’re increasing Pell just a little bit.”
But with the ONE loan program, the government would eliminate charging an origination fee. For example, the origination fee on the undergraduate Stafford loan is slightly more than 1 percent. And PLUS loans have a 4.26 percent fee, which adds nearly 1 percentage point to the annual interest rate.
Origination fees cost the average undergraduate a total of $235 and the average graduate student $1,145, according to the National Association of Student Financial Aid Administrators. In most cases, students owe interest on those origination fees when they enter repayment.
[Compare federal work-study and a part-time job in college.]
“Eliminating upfront fees on government loans would produce some savings for students, although the fees are primarily an issue with PLUS loans,” says Dash from Credible.com.
— Work-study program: The PROSPECT Act would eliminate graduate and professional students from being eligible for work-study, and the House’s provisions that would most likely have bipartisan support would change the program’s current structure for undergraduate institutions.
Colleges with more work-study money don’t necessarily have more needy students, college financial aid experts say.
“The new formula looks at how many students are demonstrating financial need,” Kantrowitz says. He adds that more selective colleges in the Northeast are likely to lose work-study allocations under the new formula.
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What to Expect When Paying for College, Grad School in 2019 originally appeared on usnews.com
