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Proposed student loan bill calls for reform, end of PSLF program as alternative to Biden ‘scheme’

FILE – In this May 17, 2018, file photo, new graduates line up before the start of the Bergen Community College commencement at MetLife Stadium in East Rutherford, N.J. (AP Photo/Seth Wenig, File)

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(NEXSTAR) – While President Biden has said he is preparing to make a decision on student loans any day now, a new bill proposed by Republican lawmakers could upend any moves Biden may make.

Calling it a “responsible alternative to Biden’s blanket student loan scheme,” three Representatives – House Republican Conference Chair Elise Stefanik (R-N.Y.), Education and Labor Committee Republican Leader Virginia Foxx (R-N.C.), and Republican Study Committee Chairman Jim Banks (R-Ind.) – introduced a bill last week to reform the country’s federal student loan system.

“America’s student loan system is broken,” lawmakers said in a joint release. “This bill addresses critical flaws in that system, so institutions of higher education no longer have an incentive to saddle students with excessive debt for degrees that don’t pay off.”

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

Among notable aspects is the proposed end of the Public Service Loan Forgiveness program for new borrowers. Commonly known as PSLF, the program is intended to erase student loan debt of certain public service workers that meet multiple requirements.

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

The bill would overhaul the income-driven repayment (IDR) plan and the elimination of interest capitalization that causes a borrower’s loan balance to “balloon.” Loan limits for borrowing and an end to uncapped borrowing for graduate students through the Grad PLUS program are also proposed.

The legislation does include targeted student debt relief “for the borrowers most in need.” This includes borrowers who have made payments for multiple years but “saw their balances explode due to Demcrats’ poorly designed repayment policies.”

Additionally, it aims at changing how Pell Grants can be used, specifically for “short-term, career-focused programs that provide valuable credentials for in-demand jobs.” The new Workforce Pell Grant would have to be used for programs that allow graduates to advance “up the economic ladder quickly and at a fraction of the cost” of a traditional college bachelor’s degree. Programs deemed less valuable would be restricted from having tuition and fees exceed the earnings increase students get from attending.

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

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

The Biden administration has proposed changes to the federal student loan system that include measures to discharge loans for certain borrowers, limit interest capitalization rates, and help borrowers working as public service employees to earn forgiveness on their loans.

Other Democratic lawmakers have recently introduced bills tackling student loans, specifically the PSLF program.

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

While there are some signs the student loan payment pause could be extended again, and that some could 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.

The Hill’s Brad Dress contributed to this report.

Politics

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