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This bill could change the way Americans pay for college

House Republicans want to completely overhaul a federal law that governs higher education in the U.S.On Tuesda...

Posted: Dec 13, 2017 4:14 AM
Updated: Dec 13, 2017 4:14 AM

House Republicans want to completely overhaul a federal law that governs higher education in the U.S.

On Tuesday, lawmakers began debate on the PROSPER Act -- which would drastically change the federal aid system and reverse some Obama-era rules aimed at holding colleges accountable.

"We cannot allow the status quo to continue," said Republican Representative Virginia Foxx, who introduced the bill and is Chairwoman of the Committee on Education and the Workforce.

With six million unfilled jobs and more than $1 trillion in student debt, the current system is broken, she said at the committee markup hearing.

The changes aim to make it easier for students to pursue "lifelong learning," which the chairwoman said is not always achieved with a traditional two- or four-year degree.

To do that, the bill would expand federal aid available to students pursuing a career or technical degree and free up work-study funds for students working for private companies.

Related: College tuition is still getting more expensive

But Democrat Representative Bobby Scott said that short-term, for-profit colleges and vocational training programs stand to win the most under the proposed legislation, at the expense of students.

The bill would repeal the gainful employment and borrower defense rules that aim to ensure for-profit colleges are offering students a useful education.

He also said provisions in the bill would make college more expensive for students.

"The bill assumes the problem with college affordability is that we're giving students too many resources to get an education or obtain skills they need to get a job," Scott said.

"I've never had a constituent tell me that the problem with higher education is that there is too much money going to help poor students go to college," he said.

Related: These education tax breaks are at risk in House tax bill

Scott made a motion to adjourn the committee's hearing because, he said, the 500-page bill was drafted by Republicans behind closed doors and was introduced just two weeks ago. His motion was denied.

Foxx has said that she expects the bill to move to the House floor in 2018.

Here are some of the key changes proposed in the PROSPER Act:

Simplify the FAFSA

The bill would make the Free Application for Federal Student Aid available on a mobile app -- something Education Secretary Betsy DeVos called for last month.

It would also allow more low- and middle-income families to submit a simplified version of the FAFSA.

Streamline loans and repayment plans

The bill seeks to narrow the complex federal student aid system to one grant, one loan, and one work-study program.

It calls for ending subsidized student loans, which are currently available to some borrowers. Instead, all borrowers would receive unsubsidized loans -- which means they would start accruing interest as soon as the funds are distributed rather than when they graduate.

But it would also eliminate origination fees for federal student loans. Currently, those fees can range between 1 and 4%.

Related: Yes, student debt is delaying homeownership

The PROSPER Act also reduces the number of repayment options available for borrowers from eight to two: A standard 10-year plan and one income-based repayment plan. The new income-based plan would extend the amount of time a borrower has to pay back the money, but would only charge them 10 years' worth of interest.

Currently, there are eight different types of repayment plans.

New limits on borrowing

The bill would increase the amount of money undergraduate students are allowed to take out in federal student loans by $2,000 a year.

But it caps how much graduate students can borrow at $28,500 annually and the amount parents can borrow on behalf of their child at $12,500 annually. Currently, graduate students and parents can borrow as much as the cost of attendance.

End the public service forgiveness program

Borrowers who work in a public service job can now receive loan forgiveness after paying for 10 years. The bill would end this program for new borrowers.

Pell Grant bonus

Pell Grants are worth up to $5,920 a year and are awarded to low-income students. It's money they don't have to pay back. The bill would offer an additional $300 to students who take at least 15 credits a semester for one year, aiming to encourage them to finish their education on time.

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