Majority Republicans on the U.S. House Committee on Education and the Workforce unveiled their draft legislation today to reauthorize the Higher Education Act—the most important piece of legislation affecting American higher education. The Promoting Real Opportunity, Success, and Prosperity through Education Reform (PROSPER) Act checks in at a hefty 542 pages and touches many important aspects of higher education. I live-tweeted my first read through the bill (read the thread here), and in this blog post I am sharing some thoughts on the key themes of the legislation.
Takeaway 1: This bill would undo many Obama-era regulations and salt the earth on future regulations. It’s no secret that Republicans didn’t care for regulations such as gainful employment, borrower defense to repayment, or providing a federal definition of the credit hour. The PROSPER Act would not only undo the regulations, but prohibit the Secretary of Education from promulgating any future regulations (meaning that Congress would have to pass legislation to create any new rules). The Secretary of Education would also be prohibited from creating a federal college ratings system, even though the Obama-era effort to do so was unsuccessful.
Takeaway 2: The federal student loan system would be radically overhauled. Instead of the array of loans that are now available, there would be three flavors of a federal ONE Loan—for undergraduates, parents, and graduate students. The key details are below.
| Undergrad (dependent) | Undergrad (independent) | Parent | Grad student | |
| Annual limit (current) | $5,500-$7,500 | $9,500-$12,500 | Cost of attendance | Cost of attendance |
| Annual limit (PROSPER) | $7,500-$11,500 | $11,500-$14,500 | $12,500 | $28,500 |
| Lifetime limit (current) | $31,000 | $57,500 | Cost of attendance | Cost of attendance |
| Lifetime limit (PROSPER) | $39,000 | $60,250 | $56,250 | $150,000 |
Note: Medical students have higher loan limits than what is listed above.
Undergraduate students actually have higher loan limits, but the PROSPER Act would also allow colleges to limit borrowing by student major if they feel students are unlikely to repay their obligations. Financial aid administrators have sought this authority for years, which means that students could actually see lower loan limits. Graduate students, on the other hand, would be limited to $28,500 per year and $150,000 overall in federal loans. Given that tuition alone often exceeds this number, expect students to turn to the private market (when possible) to finance their education.
The PROSPER Act also drastically changes income-driven repayment programs. Instead of the range of programs available now, future borrowers could choose between the standard ten-year payment plan or an income-driven plan that would allow them to pay 15% of their discretionary income (over 150% of the federal poverty line) for as long as necessary to repay the loan. There would be no ending date to payments, and payments for married couples would be based on both spouses’ incomes even if they file their taxes separately. (Both of these provisions differ from current law.) The Public Service Loan Forgiveness program, which was only mentioned once in passing in the entire bill, would also end. However, people in the program now would be grandfathered in.
Takeaway 3: Colleges would be held accountable for their outcomes in new ways. The cohort default rate metric (which I’m no fan of) would be replaced by a repayment rate metric. If a program (not a college) had more than 45% of its borrowers at least 90 days delinquent or in certain types of deferment for three consecutive years, it would lose access to all federal financial aid. This is a more generous definition of repayment for colleges than the College Scorecard’s definition (repaying at least $1 in principal), so I can’t say how many colleges would actually be affected.
Another interesting piece is that colleges would have to repay at least a portion of federal financial aid dollars given to students who left college during a semester. Right now, colleges can try to claw back those funds, but this proposal would limit colleges to trying to collect 10% of the amount owed back from students. This is similar to what Matt Chingos and Kristin Blagg have proposed in a policy brief.
There are so many other interesting points in this legislation, but I think these are the three most important ones that I can speak to based on my experience and research. Keep in mind that the Senate will also introduce a Higher Education Act reauthorization bill sometime in 2018, and that the two bills may differ significantly from each other.
Robert Kelchen 
Hello Dr. Kelchen,
I am a medical student who is concerned about the new implications and impacts of the PROSPER ACT. It has been hard for my classmates and I to get information about how the new Federal ONE Loan Program will change our loan limits. I have read that there will be some type of exception for us. Right now, we depend on Grad Direct PLUS loans for the remainder of our funding (after our direct unsubsidized loans). I am curious if our lifetime limit of annual limit will differ when compared to other Graduate Programs. My classmates and I attend one of the most expensive schools in the U.S. and would love your insight on the matter.
Thank you for your help,
Madison
Hi Madison,
Thank you for the question. The PROSPER Act would allow medical students to borrow an additional $20,000 per year beyond other graduate students (if under a 9-month academic year) or $26,667 (if under a 12-month academic year). In either case, the lifetime limit would be $235,500 in federal loans.
This won’t cover the full cost of attendance, but would cover at least $48,500 per year. Feel free to drop me a note if you have any other questions.
Dr. Kelchen,
Thank you for writing back so quickly. Would these new protocols apply to those who are already in school and have accepted previous loans? or is this for new borrowers only? For instance, most of us are 1.5 years into our schooling career (out of 4 years) but, have to apply to financial aid each year. Are we considered new borrowers each year? By August of 2018, my colleagues and I will have already borrowed $192,000 (Direct Unsubsidized + Direct Grad Plus) for 2 years of school. Will the PROSPER Act make it impossible for students like me to complete a medical education without taking out private student loans?
Madison
First of all, this bill would be unlikely to take effect until the 2019-20 academic year at the earliest–so the start of your final year. This limit would only apply to new loans after the bill took effect, so your $192k wouldn’t count and your loan limit would be reset. You would have to get private loans for the balance above $48,500 in your final year, but that would be it.