Can Republicans Fix Student Debt?

Unlike Democrats, Senate and House Republicans have released proposals that would actually tackle the root causes of increasing student loan debt.

As a long-awaited Supreme Court decision on President Joe Biden's massive student loan forgiveness plan looms, Senate Republicans have unveiled a plan of their own to address the nation's climbing student loan debt burden. However, instead of promising blanket forgiveness, the Senate Republicans' plan aims to reform how student loans are given out in the first place—seeking to direct students toward high-quality programs and limit access to schools that provide a poor return on students' investment. 

The plan is composed of five separate bills. Three of the bills focus on ensuring that prospective borrowers are aware of the financial tradeoffs of taking out student loans and the financial outcomes for alumni of specific institutions. The last two tackle the federal student loan system itself, cutting down the number of repayment plans and limiting the circumstances in which federal student loans can be given out.

The first bill in the package focuses on increasing transparency from colleges. The bill seeks to require colleges and universities to provide a wide range of data on student outcomes and enrollment trends to the National Center for Education Statistics, which would create a database of this information aimed at helping prospective students make informed educational decisions.

The proposal's second bill would require colleges and universities to use a standardized financial aid offer form in order to maximize transparency around the true cost of attending a given institution. The third bill in the proposal has similar aims, requiring that students applying for federal student loans receive information detailing sample payments for their loans, as well as how long they would expect to be paying off their student loans, and what income they can expect to make after graduating from a given school.

The fourth bill cuts down on the number of repayment plans available to borrowers. The bill would consolidate the host of current repayment options down to two—a standard 10-year repayment plan and a Revised Pay As You Earn (REPAYE) repayment plan with minor changes. The REPAYE plan is an income-driven repayment (IDR) plan, which currently allows borrowers to pay a monthly amount fixed to their income, achieving forgiveness after at least 20 years of payments. 

Importantly, the fourth bill also cuts off access to federal student loans for students attending programs that do not result in median earnings higher than those of adults who only have a high school diploma—or a bachelor's degree, in the case of a graduate program. 

The final bill in the package would eliminate Graduate PLUS Loans—a type of federal student loan whose borrowing cap was removed in 2006. The removal of this cap has been directly connected to a rapid increase in graduate school tuition, as—unlike for undergraduate programs—graduate students were able to borrow an unlimited amount from the federal government, incentivizing universities to jack up prices. 

Notably, House Republicans have also introduced their own legislation aiming to reform federal student loans. Their proposal would provide "targeted" student debt relief to those who have consistently made payments but have seen their debt increase anyway. The proposal would also reform existing income-driven repayment plans and mandate considerable warnings for borrowers before student loan payments resume in October. 

"Colleges and universities using the availability of federal loans to increase their tuitions have left too many students drowning in debt without a path for success," said Sen. Bill Cassidy (R–La.) in a Wednesday statement. "Unlike President Biden's student loan schemes, this plan addresses the root causes of the student debt crisis. It puts downward pressure on tuition and empowers students to make the educational decisions that put them on track to academically and financially succeed." 

The Republicans' plans offer a constructive solution to the problems that plague the federal student loan system. Rather than focusing on short-term solutions—like Biden's $400 billion student loan forgiveness boondoggle—Republicans' plans target the sloppy government policies which directly cause rising student debt.

In particular, the Senate's attempt to eliminate Graduate PLUS Loans and both plans' proposals to reform income-driven repayment plans take direct aim at some of the most fiscally irresponsible federal student loan policies. 

While both bills face an unlikely path toward actually becoming law, they provide a clear template for what a sensible response to the student loan crisis looks like—and policies that are actually likely to lower the cost of college, not raise it.