Student loan bill calls for reform and end to PSLF program as alternative to Biden ‘program’

(NEXSTAR) – As President Biden says he’s gearing up to make a decision on student loans any day, a new bill proposed by Republican lawmakers could upend any measures Biden could take.

Calling it a “responsible alternative to Biden’s general student loan program,” three representatives — House Republican conference chairwoman Elise Stefanik (RN.Y.), Republican education and labor committee leader Virginia Foxx (RN.C.) and Republican Review Committee Chairman Jim Banks (R-Ind.) — introduced a bill last week to reform the nation’s federal student loan system.

“The US student loan system is broken,” the lawmakers said in a joint statement. “This bill fixes critical flaws in that system, so that higher education institutions no longer have an incentive to impose excessive debt on students for degrees that don’t pay off.”

The Responsible Education Assistance through Loan (REAL) Reforms Act, or REAL Reforms Act, has five main purposes.

Notable aspects include the proposed end of the civil service loan forgiveness program for new borrowers. Commonly referred to as PSLF, the program aims to erase student loan debt from certain public service workers who meet multiple requirements.

Lawmakers are also calling for protection for students, borrowers and taxpayers. They recommend ending the student loan repayment pause, which was originally initiated by former President Donald Trump at the start of the COVID pandemic and has since been extended several times.

The bill would revise the income-contingent repayment (IDR) plan and eliminate interest capitalization that “inflates” a borrower’s loan balance. Loan limits for borrowing and the end of uncapped borrowing for graduate students under the Grad PLUS program are also offered.

The legislation includes targeted student debt relief “for borrowers who need it most.” This includes borrowers who have made payments for several years but “saw their balances explode due to the Democrats’ ill-conceived repayment policies.”

Additionally, it aims to change the way Pell Grants can be used, particularly for “short-term, career-focused programs that provide valuable referrals for in-demand jobs.” The new Workforce Pell grant is expected to be used for programs that allow graduates to progress “rapidly and at a fraction of the cost” of a traditional college bachelor’s degree. Programs deemed less valuable might not have higher tuition fees than the increased income students get from attending.

Justin Draeger, president and CEO of the National Association of Student Financial Aid Administrators, said in a statement that the organization is “pleased to see thoughtful proposals in [the House Republicans’] legislation” but was “alarmed” to see the PSLF on the block.

According to NASFAA, this bill replicates some aspects of the PROSPER Act, which Foxx introduced in 2017.

The Biden administration has proposed changes to the federal student loan system that include measures to pay off some borrowers’ loans, limit interest capitalization rates, and help borrowers working as public employees get a rebate on their loans.

Other Democratic lawmakers have recently introduced student loan bills, particularly the PSLF program.

Rep. Joe Courtney (D-Conn.) has proposed legislation that would cut the time it takes to get relief through the PSLF program in half. Later, two New Jersey Democratic lawmakers introduced a proposal that would make it easier for some previously ineligible public servants to qualify for loan relief under the same program.

While there are signs that the student loan payment break could be extended again and that some may see debt relief, the Biden administration’s plan remains mostly a mystery. Biden is expected to make a decision before the end of the month.

Hill’s Brad Dress contributed to this report.

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