Revamping income-driven repayment: The bill would revise income-driven repayment in a way that would make the forgiveness portion more generous and deliver more help to struggling borrowers.
Under the current student loan plan, borrowers can have their monthly payment capped to a percentage of their earnings, with the balance forgiven after 20 to 25 years. Existing plans allow borrowers to pay nothing if they lack discretionary income, meaning they lack any earnings above 150 percent of the federal poverty line ($18,735 for a single person).
House Democrats would increase the repayment threshold to 250 percent, about $31,225 for an individual, in 2019. And after 20 years of payments, including months when the payment is zero, the borrower would have the balance forgiven. Those changes could result in the federal government forgiving more debt.
In a review of the bill, policy analysts at the think tank New America said raising the threshold “establishes a higher baseline that ensures borrowers have the resources needed to provide for necessities like food and housing.”
Under the proposed measure, participants’ income would be automatically recertified on an annual basis, rather than requiring borrowers to manually provide the information to remain in the program. Borrowers routinely fall out of repayment plans when they fail to verify their income every year, often resulting in higher monthly payments until the issue is resolved. House Democrats would also automatically enroll people who are more than 120 days delinquent on their loans into the income-driven plan, a change that could ensure borrowers avoid default.
Campus child-care bonus: House Democrats would award performance bonuses to schools in the Child Care Access Means Parents in School Program, which assists low-income students with child-care costs.
Colleges with long-standing participation and track records of helping students with children graduate would be eligible for more money when appropriations for the program exceed $140 million a year. Schools could receive up to 20 percent of their annual grant award as a bonus.
To make the bonus effective, the Education Department would need to update the way it measures whether students benefiting from the program are continuing their studies or graduating. A recent Government Accountability Office report noted that the existing calculation fails to include students who transferred from a community college to a four-year institution.
Even with a recent injection of money from Congress, the college child-care program is chronically underfunded and routinely has waiting lists. The bill would quadruple authorized funding for the program to $200 million.
Emergency student aid: The legislation would reconfigure the Federal Supplemental Educational Opportunity Grant, which provides low-income students up to $4,000 a year, to extend aid to cover unanticipated expenses.
The sudden loss of housing, not having enough to eat or even car repairs can derail students from remaining in college and earning a degree. Schools have been experimenting with emergency grants for years to retain students pushed to the edge of dropping out by an unforeseen hardship.
House Democrats would cap emergency aid to $500 per academic year, although students can apply for assistance in multiple years.
The bill also changes the allocation formula of the supplemental grant program to direct money to colleges based on the percentage of low-income students, not how long the school has participated in the program.
Pell Grant increase: House Democrats want to boost the maximum Pell Grant award for low-income students by $500 and tie increases to inflation so the value of the grant doesn’t diminish. This would result in a total award of $6,695 for fiscal year 2021 and an estimated award of $8,305 by fiscal 2029, according to the bill.
The purchasing power of Pell, the primary source of federal grant aid for millions of students whose families typically earn less than $60,000 a year, has waned amid rising college costs. The maximum Pell Grant now covers 29 percent of the cost of attending a four-year public university, compared with 79 percent in 1975 and 42 percent in 2001, according to the Center on Budget and Policy Priorities.
By some estimates, the increase House Democrats are proposing would result in the grant covering about 31 percent of the cost of public college.
“This bill makes a down payment on college affordability through increasing Pell, but ultimately we’ll need much larger investments in the program to make college affordable for low-income students and families,” said Wil Del Pilar, vice president of higher education at the Education Trust, an advocacy group.
House Education Committee aides say the boost to Pell should be viewed in the context of other increases in grant aid that, taken as a whole, would drive down the cost of college for low-income students.
Default fallout: While the bill would make it easier for borrowers to have a student loan default removed from credit reports, it fails to address other onerous consequences of falling severely behind on payments.
The measure contains no provision to cap the fees collection agencies can charge or prevent states from suspending a defaulted borrower’s professional license. Although the federal government offers ways to resolve a default, borrowers can still face fees of up to 25 percent of the loan balance.
James Kvaal, president of the nonprofit group the Institute for College Access and Success, said he was disappointed the bill neglected “excessive collection costs” and failed to shield borrowers from losing their livelihood over a default.
“Students who default on their student loans often face punitive consequences that, ironically, make it harder for them to get back on their feet and repay their loans,” said Kvaal, who served in the Obama White House and Education Department.