Measure should be seen as the “‘Foxx in Sheep’s Clothing” that it is
By Aissa Canchola Bañez | January 31, 2024
Over the last three years, we’ve seen the Biden Administration make progress in providing over $130 billion in student debt relief, fixing long-plagued programs including Income-Driven Repayment (IDR) and the Public Service Loan Forgiveness Program (PSLF), and penalizing student loan servicers for failing to support borrowers.
Meanwhile, Representative Virginia Foxx, Chairwoman of the House Education and Workforce Committee and her House colleagues have been working overtime to obstruct these efforts, pushing many of their very own constituents further into debt in the process. Most notably, 128 members of the House of Representatives joined the effort that successfully convinced the Supreme Court to strike down President Biden’s debt relief program which would have provided debt cancellation to 20 million borrowers, with 90 percent of relief dollars going to folks earning less than $75,000 per year.
In 2023 alone, Congressional Republicans led efforts, not once, not twice, but three times on proposals to block President Biden’s debt relief plan; restart student loan payments and retroactively claw back PSLF relief from public service workers including teachers, nurses, and police officers; and make student loan payments even more expensive for twenty-two million borrowers by repealing the Saving on A Valuable Education (SAVE) repayment plan.
Just this month, Representative Virginia Foxx unveiled a proposal outlining what she has called “a comprehensive solution that will lower college costs for students and families.” Unfortunately, only a quick look under the hood of this sweeping bill, the College Cost Reduction Act, exposes that it does little to address the flaws of our broken student loan and financial aid system. In fact, it will actually embolden predatory actors that consistently load up students with unmanageable debt and make it harder for borrowers to finally get relief.
The bill—to no surprise—is just the latest in their efforts to roll back the Biden Administration’s work to make student loan payments affordable and provide much-needed student loan debt relief. The bill would sunset existing IDR plans for future borrowers—including the most generous option to date, the SAVE plan. It would instead replace them with a standard 10-year repayment plan and a far less generous “repayment assistance plan” which would make low-income borrowers have to pay more with no chance of forgiveness, essentially locking them into repayment for the rest of their lives. Not only will the bill make it more expensive and much harder for millions of working people to pay off their student loan debt, but the bill also repeals regulatory actions intended to help borrowers seek justice after being scammed by for-profit institutions and hold bad actors accountable.
Perhaps one of the most troubling aspects of the bill is its complete failure to substantially invest in higher education as a public good and ensure that students and families are not forced to borrow record levels of debt to achieve the promise of a higher education. There are no proposals to address chronic state underfunding of public colleges and universities, fix deep inequities in funding for Historically Black Colleges and Universities (HBCUs), Hispanic Serving Institutions (HSIs), or Tribal Colleges and Universities (TCUs), or address rising costs of attendance at community colleges.
Instead, the bill caps financial aid and limits access to federal student loans, including placing new caps on graduate borrowing levels while also eliminating GRAD Plus and Parent PLUS loans for future borrowers.[1] The Foxx bill specifically caps annual loan limits based on the national “median cost of college” for the student’s program of study and provides financial aid administrators with discretion to further decrease or increase this limit, while also capping total federal borrowing for graduate school at $100,000 (and $150,000 for graduate professional programs).
While these proposals may seem like a reasonable attempt to force institutions to reign in college costs, students seeking to attend a program above this threshold could bear the brunt by being forced into the jaws of the private lending industry or drive them away from a higher education altogether. By definition, half of all current programs’ costs would be higher than the “median cost” threshold, meaning millions of students would have to find alternative financing that offers fewer protections, repayment plans, and loan cancellation options. Even students who need to cobble together a few thousand dollars to address the cost of attendance might have to choose between basic necessities and meeting the costs of their program, while also navigating an even more complex system of lending. Students also currently routinely must borrow more than $100,000 for graduate school, leaving open the question of how, if at all, these students will be able to access their chosen program. Rather than invest heavily in actually lowering the price students pay – through greater public funding of institutions, including graduate programs, much larger need-based grant aid for both undergraduate and low-income graduate students—the Foxx bill simply limits what is currently the safest financing mechanism for students.
Perhaps one of the most troubling aspects of the bill is its complete failure to substantially invest in higher education as a public good and ensure that students and families are not forced to borrow record levels of debt to achieve the promise of a higher education.
Attempts to eliminate or limit programs like Grad PLUS and Parent PLUS aren’t new. In fact, the Consumer Bankers Association—the voice of the private student loan lobby—has been on record calling for efforts to impose limits on Grad and Parent PLUS lending as a way to pad their bottom lines. Eliminating these programs, however, could significantly weaken the student loan safety net—limiting the benefits of IDR to borrowers. Let’s explore why:
Eliminating access to Grad PLUS and Parent PLUS Loans could weaken the student loan safety net.
In the Higher Education Act, Congress has provided critical consumer protections for borrowers with federal student loans, creating alternative repayment programs like IDR and debt relief programs like Total and Permanent Disability discharge. These options intend to ensure that federal student loans are affordable in the near term and will not pose a life-long financial burden for borrowers. For former graduate students, the existing student loan safety net programs allow a borrower to select a single IDR plan that repays all their graduate and undergraduate debt—an option that helps to keep student debt manageable should their graduate degree not lead to significantly higher earnings. Curtailing access to federal loans, particularly graduate loans, will leave low-and middle-income students with a funding gap that they will be forced to fill with loans in the private market.
Students forced to finance their education in the private market face a riskier landscape, with loans that contain fewer safeguards and protections, particularly for borrowers who hit hard economic times or experience health challenges and have trouble managing their monthly payments. The stakes are even higher for a borrower who becomes disabled after graduating from a program. Under current policy, the Total and Permanent Disability Discharge program would erase a borrower’s federal student debt entirely should they be unable to work due to a disability. Under the Foxx bill, without access to the Grad PLUS program, a borrower forced to take on private student loan debt, which typically does not offer a discharge due to disability, will be driven deep into poverty. Forcing more borrowers to have to piece together federal and private student loans to pay for their degree is a recipe for disaster and will make the student debt crisis even worse.
Chairwoman Foxx’s proposal to eliminate access to Grad PLUS while also eliminating the SAVE Plan will make higher education more expensive and financially riskier for borrowers.
Instead of ending their obstruction campaign and working with President Biden to ensure their constituents get much-needed relief, this proposal will roll back years of progress and push borrowers and families further into the red. Student loan borrowers must see this proposal for what it is, nothing more than a ‘Foxx’ in sheep’s clothing.
###
Aissa Canchola Bañez is the Senior Advisor for Policy and Strategy at the Student Borrower Protection Center. She brings a decade of experience in Congress, Executive Agencies and advocacy working to advance policy solutions to improve the lives of workers and families and create a more just and equitable society. Prior to joining the SBPC, she served as Deputy Chief of Staff and Legislative Director for Congresswoman Ayanna Pressley (MA-07) where she led the Congresswoman’s policy work, including efforts to protect borrowers and make student loan debt cancellation a reality.
[1] Note: This blog post was updated on March 11, 2024 to reflect technical changes to the operation of loan limits should the legislation described above become law. An original version of this blog did not specifically reference the bill’s annual loan limits being tied to the national “median cost of college” for the student’s program of study. The blog also included an example of a typical student seeking a two-year Masters in Social Work (MSW) degree, and overstated the amount of private loans the student might need annually under the Foxx bill. However, our analysis shows that the typical MSW student would likely have to take on thousands in alternate financing, and under the bill would not have access to the Biden Administration’s SAVE plan, which would reduce monthly payments and offer a clear timeline for cancellation.