A sweeping plan to change the U.S. student loan and financial aid system is released by Republicans in Congress. The idea is known as the Student Success and Taxpayer Savings Plan, calling for less federal spending and fixing what the group calls a ‘broken’ loan system. It would impact millions of students across the country; those applying to college, and those already repaid their student loans.
The plan has also received both support and strong criticism. It will also lessen the taxpayer burden, according to supporters. But its critics complain it will drive college fees and admissions up, especially for less well-off students.
Key Changes to Borrowing
A major part of the proposal is new limits on student loans. Under the plan, federal loans to undergraduate students could be in a maximum amount of $50,000. The cap on a graduate student’s salary would increase to $100,000. At this moment, the student’s status and year affect and determine the borrowing limit.
But that rapid change could lead many students down the private loan path, which often has higher interest rates and fewer protections. Private loans don’t have income-based repayment or loan forgiveness options because they are riskier for borrowers.
Direct subsidized loans would also end, those that do not have to collect interest while students are in school. Alternatively, these parent PLUS and graduate PLUS loans could also be eliminated or reduced.
Fewer Repayment Options
They also have another big change in decreasing the number of repayment plans. Currently, federal borrowers have a variety of IDR plans to choose from. Fiscally responsible plans make these monthly payments affordable to the individual’s income. Under the Republican plan, those IDR plans would be reduced to only one.
But President Biden’s “SAVE” plan would not be this single plan as generous as the Repayment Assistance Plan. Despite the fact that most borrowers would likely see monthly bills rise, the plan would prevent balances from growing if payments were made on time.
Tougher Rules for Pell Grants
The proposal also means that it becomes harder to qualify for Pell Grants, nonrepayable federal awards for low-income students. Students will have to take at least 30 credit hours per year, up from the 24 at the moment. It would harm students attending community colleges who have jobs or families, and tackling a full course load might be difficult for them.
The plan would also allow those taking part in short term job training programs, such as welding or cosmetology, to be eligible to get Pell grants. “They say it helps the students get into the workplace faster,” supporters say.
Mixed Reactions
Republicans also say the bill will save billions and let for more tax cuts. They also assert the policy will prohibit colleges from charging high rates and providing poor results. Penalties for colleges that leave students with heavy debt and low incomes are a part of the plan.
The plan, however, is hurting the very students that need the help most, as critics argued. But advocacy groups warn the proposal could make students too far in debt, lock students out of higher education and widen the racial and income gaps in college completion.
Conclusion
The Republican student loan plan would make big changes in how students finance their educations. That is because it broadens how much students have to pay back, requires fewer payment options, and makes it harder for students to get Pell Grants. But supporters argue that it saves money and fixes broken systems. They say it punishes the students and limits access to education. Millions of students and families watch as debate continues.
