College Cost Reduction Act: A Comprehensive Overview

The College Cost Reduction Act (CCRA), introduced by Rep. Virginia Foxx (R-NC), aims to overhaul the student loan process and address rising college costs. This bill represents an effort to update the Higher Education Act of 1965 (HEA), which has not been comprehensively reauthorized since 2008. The CCRA seeks to introduce a mix of policies intended to benefit students and institutions but also includes provisions that raise concerns among some stakeholders.

Key Provisions of the College Cost Reduction Act

The CCRA encompasses a wide range of policy proposals that touch on various aspects of higher education finance and accountability. These provisions can be broadly categorized into areas such as financial aid, student loans, institutional accountability, and transparency.

Financial Aid Reforms

Pell Grants: The bill seeks to double the maximum Pell Grant award for junior and senior students who are on track to graduate on time and are enrolled in bachelor’s degree programs considered to provide a high return on investment. Additionally, a student's Pell Grant award for the academic year would be limited to no more than the median cost of college for the educational program.

Federal Supplemental Educational Opportunity Grant (FSEOG): The bill seeks to eliminate the Federal Supplemental Educational Opportunity Grant program, a vital support for many low-income students.

PROMISE Grants: The CCRA would establish new performance-based Promoting Real Opportunities to Maximize Investments and Savings in Education (PROMISE) Grants to provide more flexible funding for a range of activities (as opposed to direct student aid) provided they improve completion rates, increase value-added earnings, and support postsecondary student success. PROMISE Grants would be funded primarily by new reimbursement payments related to federal student loans that IHEs would remit annually to the Secretary per Section 301 of H.R. 6951.

Changes to Need Analysis: The bill would make changes to the overall need analysis formula that would limit aid to low-income students. Section 201 would change the way student eligibility for need-based federal aid is calculated by basing the calculation on the median cost of all comparable programs of study rather than the cost of attendance of a student's specific program as determined by the institution. This change would make need for a student equal across institutions for a given program of study.

Student Loan Reforms

Loan Limits: The bill also would terminate PLUS loans for graduate students and parents, put strict limits on other forms of student loan borrowing, and make changes to the overall need analysis formula that would limit aid to low-income students. The bill caps aggregate student loan limits at $50,000 for undergraduate students, $100,000 for graduate students, and $150,000 for students in graduate professional programs. The bill also pares back annual loan limits for schools with excessively high tuition.

Loan Repayment: On the student loan side, the bill would prevent interest from capitalizing on student loans, simplify the student loan repayment process, and require students to only pay back what they would have owed on a 10-year standard repayment plan. The CCRA would create two repayment plans to replace all current repayment plans.

Income-Driven Repayment Plan: Borrowers choosing the income-driven plan must pay ten percent of their annual income above a set threshold (currently $21,870). However, borrowers who make positive payments will see at least half their payment applied to loan principal, even if the payment does not fully cover accrued interest.

Institutional Accountability

Risk-Sharing: The bill contains a new version of a risk-sharing proposal that would make colleges and universities responsible for loans that their former students do not pay off. Colleges which load their students up with too much debt relative to earnings after graduation will face larger liabilities, but they can reduce these costs by lowering their prices or improving the quality of their education to boost graduates’ earnings.

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Value-Added Earnings Metric: It would create a new value-added earnings metric that picks winners and losers based on what institutions charge per program relative to what students earn at their jobs after leaving the institution. The CCRA would create a “value-added earnings” metric for all Title IV students who completed their programs.

Transparency and Data Systems

Financial Aid Offers: H.R. 6951 would require the Secretary of Education (hereinafter, "the Secretary") to develop a standard financial aid form for institutions of higher education (IHEs) to notify students of their financial aid packages. The standard form would include the following elements: Cost information: the cost of attendance and other descriptive information about the financial aid offer, generally. Net price: the estimated amount that the student must pay to enroll in the institution for the academic period covered by the financial aid offer. Student employment: information on work-study employment opportunities available, such as through federal, state, or institutional work-study programs. Process for accepting, adjusting, or declining aid and next steps: information about next steps in the financial aid process and other sources of information for students and their parents about the financial aid offer and college costs and student outcomes.

Postsecondary Student-Level Data System (PSDS): H.R. 6951 would authorize ED to develop a postsecondary student-level data system (PSDS) to track HEA Title IV-aided students and students receiving federal military and veteran education benefits. The bill also includes a number of provisions that would seek to ensure data privacy and security protections, consistent with federal law, and prioritize the streamlining of data collection and reporting.

Regulatory Relief

The regulatory relief provisions in the legislation would repeal a long list of cumbersome rules for institutions of higher education (IHEs), including the Gainful Employment Rule and fully repeal the 90/10 statute. The CCRA would also repeal the following recent final regulations and Department guidance in full or relevant part. For each of these regulations, the CCRA would repeal current regulations and prohibit further rulemaking on each subject by the Department of Education.

Potential Impacts and Analysis

The College Cost Reduction Act has the potential to significantly reshape the landscape of higher education finance and accountability. However, the effects of the bill are subject to debate and depend on the specific provisions under consideration.

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Impact on Institutions

Risk-Sharing Implications: The risk-sharing component of the CCRA could have a substantial impact on colleges and universities, particularly those with programs that lead to high debt and low earnings for graduates. Institutions may face financial penalties if their former students struggle to repay their loans. However, schools can therefore reduce their potential risk-sharing liabilities by reducing tuition, which will raise their EPR.

PROMISE Grant Incentives: The PROMISE Grant program incentivizes institutions to improve student outcomes, lower tuition, and enroll more low-income students. Public community colleges, which primarily grant credentials of two years or less, are the biggest “net winners” under the House plan. The low prices and short durations of these programs mean public community colleges reap the biggest rewards of the House plan’s emphasis on low tuition.

Impact on Students

Changes to Loan Limits: The CCRA proposes to limit borrowing to $100,00 for graduate students and $150,000 for professional students. Student loan caps restrict access to higher education for students who cannot pay upfront or who have limited resources.

Pell Grant Adjustments: Under the CCRA, Pell Grant awards would be limited to the median cost of all colleges, rather than the cost of attendance for the specific school a student attends. Pell Grant recipients pursuing a degree from programs with a higher-than-average cost would be eligible for smaller grants.

Impact on Borrowers: The CCRA would enhance benefits for graduate borrowers, who typically have higher incomes, and would reduce benefits for undergraduate borrowers, particularly those who earn certificates and associate’s degrees, who generally have lower incomes.

Budgetary Effects

The Congressional Budget Office (CBO) estimates that the bill, in total, would result in budgetary savings of $185.5 billion in direct spending over a 10-year period. CBO estimates that implementing the changes to repayment plans would reduce direct spending for student loans by $127.3 billion over the 2024-2033 period.

Concerns and Criticisms

Despite its proponents' claims, the College Cost Reduction Act has faced criticism from various stakeholders. Some of the main concerns include:

Elimination of FSEOG: The elimination of the Federal Supplemental Educational Opportunity Grant program, a vital support for many low-income students.
Limitations on PLUS Loans: The termination of PLUS loans for graduate students and parents.
Changes to Need Analysis: Changes to the overall need analysis formula that would limit aid to low-income students.
Risk-Sharing Concerns: Some worry that risk-sharing could lead institutions to restrict access for certain student populations or reduce investment in programs with uncertain earnings outcomes.
Complexity and Data Limitations: Some analyses are limited due to disparities in the availability of data sources and the assumptions made to fill in missing data.

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