Analysts say the reauthorization process could continue for another year or more, but early versions of the bill have already drawn attention.
The EAB Daily Briefing team has rounded up the key details in the current version of the bill. We'll continue updating this page as the bill changes over time.
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Loosened restrictions on credit hours: One of the most important proposed changes could bring significant changes to credit hours. The provision would repeal a rule issued by the Obama administration that sought to impose limits on how colleges could define a credit hour. Republican groups say the rule was burdensome and hampered innovation, while other groups say the rule is necessary to prevent chaos and abuse by for-profit colleges.
Financial aid overhaul
Extra Pell for extra credits: Students who take more than a full-time workload could receive an additional $300 per year in Pell Grant funds. Would also require counseling related to student loans and Pell Grants, which could create an administrative burden on financial aid professionals, according to the National Association of Financial Aid Administrators (NASFAA).
Some financial aid programs eliminated: The bill would eliminate the Perkins Loan Program and Federal Supplemental Educational Opportunity Grant.
Streamlined payment plan options: Student borrowers currently face a wide and often confusing array of repayment options. The PROSPER Act calls for trimming down to one standard plan, one income-driven plan, and eight options for deferment or forbearance. The bill would also restructure income-driven plans, for example, raising payments to 15% of income and capping total repayment amounts. Finally, the bill would eliminate loan forgiveness through income-driven plans and public service.
Simplified FAFSA: The bill calls for streamlining FAFSA by expanding the IRS data retrieval tool, requiring consumer testing of the application, and developing a mobile-friendly version of the application. The bill would continue using prior-prior year data.
Learn more: What's so hard about FAFSA?
No more elimination fees: The bill would eliminate student loan origination fees.
Caps on borrowing: The PROSPER Act would limit the amount that graduate students and parents of undergraduates can borrow. It would also give financial aid administrators the power to limit loan amounts in an effort to prevent over-borrowing.
First step towards a new system: The addition would instruct the Secretary of Education to study the feasibility of a student-level data system run by the National Student Clearinghouse.
Accountability and risk-sharing
Skin in the game: The bill would stop measuring borrower cohort default rates. Instead, it would use loan repayment rates at the program level for a "risk-sharing" metric. If an academic program experiences one year in which 45% or more of borrowers are 90 days delinquent, it must create a "repayment improvement task force." If the situation continues up to three consecutive years, the program would lose access to the federal loan system.
Reward for Pell student success: Schools with high completion rates for Pell students, or who show significant improvement in this area, would receive money from a reserve fund.
How to support on-time graduation for low-income students
Accountability for minority-serving institutions: Minority-serving institutions must graduate or transfer 25% or more of their students to continue receiving certain federal grants.
No more gainful employment rule: The rule was implemented under the Obama administration and sought to apply tougher regulations to vocational and non-degree programs at community colleges and for-profit institutions. The rule set benchmarks based on the typical graduate's annual loan payments and annual salary, and institutions that failed to meet them could lose out on access to federal financial aid.
No more 90/10 rule: The measure forbids for-profit institutions from receiving more than 90% of their total revenue from federal funding, including grants, loans, and work-study programs. The rule contains well-known loopholes, and hundreds of for-profit institutions do, in fact, receive more than 90% of their funding from federal sources when taking these loopholes into consideration.
(Bidwell, NASFAA, 12/4; Douglas-Gabriel, Washington Post, 12/12; Kreighbaum/Fain, Inside Higher Ed, 12/4; Kreighbaum, Inside Higher Ed, 12/12; Green, New York Times, 12/12; Wilson, The Hill, 12/12)
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