What Is the College Cost Reduction Act?
Credit: Tasos Katopodis / Stringer / Getty Images News- Republicans failed to pass the College Cost Reduction Act in 2024.
- Still, many components of the bill could form the basis of future cost-cutting.
- The House Committee on Education and the Workforce is tasked with cutting $330 billion over the next 10 years.
- Some advocates worry many of the cost-cutting measures could negatively impact students, borrowers, and institutions.
A failed 2024 bill could have a second life as congressional Republicans look to cut hundreds of billions of dollars in federal education programs.
The College Cost Reduction Act (CCRA), proposed in January 2024 in the U.S. House of Representatives by Rep. Virginia Foxx, aimed to overhaul much of the U.S. higher education system. The proposal would have, among other things, upended the federal student loan system, funded college completion grants, and repealed for-profit college oversight regulations.
The bill ultimately failed, despite attracting 153 cosponsors — all of whom were Republicans.
But with Republicans leading both chambers of Congress and in the White House, many aspects of the bill may resurface. The House recently passed a budget resolution that calls on the House Committee on Education and the Workforce to find at least $330 billion in cuts over the next 10 years.
While that includes both K-12 and higher education spending, the CCRA may serve as a model to slash government spending on programs aimed at college students, institutions, and student loan borrowers.
Here are the cuts the College Cost Reduction Act proposed.
Federal Student Loan Program Changes
Some of the most substantial cost-cutting moves could come through the CCRA’s proposed federal student loan changes.
Graduate, Parent PLUS Loan Program Caps
The College Cost Reduction Act would completely eliminate two key federal student loan programs:
Currently, there is no cap on the amount of federal student loans graduate students can take out to pay for master’s and doctoral degree programs. There also is no limit on how much parents can request in Parent PLUS loans to help their dependent students pay for undergraduate school.
Limiting loan disbursements, particularly with Grad PLUS loans, could save the federal government money. That’s because some graduate students borrow upwards of $100,000 to pay for graduate school programs hoping to eventually qualify for loan forgiveness through means like the Public Service Loan Forgiveness (PSLF) program.
Loan Limits Varied by Field
The CCRA also proposes annual loan caps that vary by year and program.
For undergraduate programs, students would only be eligible for yearly loans equal to the median cost of college or the current maximum defined by the Department of Education (ED); whichever is lower. This would again keep disbursement costs down for Federal Student Aid (FSA).
Graduate programs would be capped based on the median cost of programs of study. For example, all students pursuing a master’s in social work degree would have a different annual loan limit than students pursuing a master’s in business administration.
The CCRA would also set an aggregate lifetime borrowing limit of $200,000 across all degree types.
New Student Loan Repayment Plan
Traditionally, there have been many types of repayment plans available to borrowers:
- Standard 10-year repayment plan
- Four income-driven repayment (IDR) plans
- Extended repayment plan
- Graduated repayment plans
- Alternative repayment plan
The CCRA would leave only the standard repayment plan and a singular, new IDR plan.
The new IDR plan would set monthly payments at one-twelfth of 10% of the borrower’s adjusted gross income above 150% of the federal poverty line for the borrower’s family size.
Instead of complete debt forgiveness after a set number of years of repayment (20-25, currently), loans wouldn’t be discharged until the borrower pays the same amount as they would have under the standard repayment plan.
The Congressional Budget Office (CBO) predicts this would save the federal government $127.3 billion over 10 years.
Pell Grant Overhaul
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. Additionally, the CBO report says students attending college in an area with a higher cost of living would receive smaller awards than under the current Pell Grant system.
Accountability Oversights
Some elements of the College Cost Reduction Act would save the federal government money by limiting loan forgiveness and forcing institutions to reimburse the department if graduates cannot afford to repay their student loans.
‘Skin in the Game’ for Institutions
One of the more radical proposals in the CCRA would force some colleges and universities to reimburse ED based on the performance of their student loans, the price charged to students, and the median earnings of its students.
Essentially, it aims to hold institutions accountable for poor outcomes and generate extra revenue for the federal government.
Schools with graduates who have a high amount of debt and low earnings would have to reimburse the department. If graduation cohorts have earnings higher than the debt earned, the institution would not need to pay ED.
Funds saved would go toward the establishment of a PROMISE Grant program.
According to the American Council on Education (ACE), approximately 86% of the 3,030 institutions in ACE’s database would have to make risk-sharing payments. The median payment would be just over $292,000 per year.
Three in 4 institutions with a Pell Grant enrollment above 70% would have to make risk-sharing payments, per ACE.
Reversal of For-Profit Oversight Regulations
The CCRA proposes an elimination or rolling back of many oversight programs primarily aimed at for-profit colleges and universities, including:
- The 90/10 rule
- Gainful employment
- Closed school discharge
- Borrower defense to repayment
The CBO report predicts these changes would result in fewer student loan discharges.