Republicans propose fining rich colleges for burdening students with massive debt

When it comes to burdening students with overwhelming debt that they can’t repay, America’s wealthiest colleges and universities often take the lead.

A new bill in Congress proposes imposing hefty fines on these institutions if they don’t offer students a fairer deal.

The concept, referred to as “risk sharing,” is just one of many extensive provisions outlined in the House Republicans’ proposed overhaul of the higher education system. The bill, called the College Cost Reduction Act and introduced by Representative Virginia Foxx, is the GOP’s suggested framework for reauthorizing the Higher Education Act, a federal law from the 1960s that governs colleges.

The law is supposed to be renewed every five years, but it has only been temporarily extended since its latest renewal in 2008. In the meantime, the country’s student loan debt crisis has escalated as the average cost of college tuition has skyrocketed.

Several proposals in the 224-page GOP bill have already faced criticism from Democrats and higher education advocates. For example, Republicans want to reduce the amount of money students can borrow for college. Under the bill, undergraduate students would be limited to a total borrowing amount of $50,000, while graduate students would be limited to $100,000.

This proposed cap would be a significant change that could also restrict students without grant money to a select few schools for their studies.

The GOP’s ideas for fixing the federal student loan system have drawn intense backlash from Sameer Gadkaree, president of the Institute for College Access & Success. Gadkaree argues that these proposals could condemn many American families to a lifetime of debt, particularly in relation to changes in income-driven repayment plans.

Due to its extensive nature, it is highly unlikely that the massive legislation will make substantial progress in this Congress, which has experienced significant gridlock.

However, there is a growing bipartisan sentiment on Capitol Hill to make higher education more affordable. President Joe Biden has made it a central focus of his push for broad student loan relief. Even in their opposition to these efforts, Republicans have relied on bipartisan criticism of the rising cost of college in America.

“We want to ensure quality education for students,” said Rep. Virginia Foxx in an interview with USA TODAY. “Too often, colleges and universities emphasize milking students and parents for financial gain.”

A House aide, who is not authorized to publicly discuss the legislation, told USA TODAY that Democrats vehemently oppose it. Republicans did not consult them while crafting the bill, unlike with more bipartisan legislation.

Karen McCarthy, the vice president of public policy and federal relations at the National Association of Student Financial Aid Administrators, said that colleges are still analyzing the bill, awaiting feedback from more schools.

“We’re always wary of unintended consequences,” McCarthy stated. “With a bill of this magnitude, there are always aspects we like and areas of concern.”

Which colleges would face the greatest fines?

A radical change proposed in the bill would make colleges, rather than student loan borrowers, financially accountable for unpaid loans.

According to a summary of the bill, colleges would be responsible for repaying their graduates’ loans if those individuals do not earn as much money as projected by the institution.

A study conducted by The Foundation for Research on Equal Opportunity estimates that private schools could face hundreds of millions of dollars in fines for leaving students burdened with debt. For instance, the University of Southern California may face an annual penalty of approximately $170 million. The university did not respond to a request for comment on the proposed fine. Similarly, the University of Phoenix could face tens of millions of dollars in penalties.

Preston Cooper, a higher education researcher at FREOPP, stated that elite nonprofit schools would be the most affected by this law.

“These institutions heavily rely on the student loan program,” Cooper explained. “The ultimate goal is not to reward or punish different institutions but to change the incentives.”

Democrats oppose the idea as the higher education lobby raises concerns about the bill

Currently, the concept of holding colleges financially accountable for unpaid federal student loans lacks bipartisan support. Behind closed doors, Democrats are concerned that this provision could disproportionately harm community colleges and minority-serving institutions, according to the House aide.

Major players in the higher education lobby also have reservations about the proposal. While the American Council on Education has not taken an official stance on the bill, Emmanual Guillory, the group’s senior director of government relations, shares the concerns of Democrats. Guillory believes that the risk-sharing provision could negatively impact colleges that enroll a higher number of students from marginalized communities.

Guillory argued against penalizing colleges for pay gaps in the job market or labor challenges in other industries.

“Not everyone starts from the same point,” he emphasized. “We understand the rationale, but it simply doesn’t work that way.”

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