Student Loan Debate Continues

Bobby Scott (D-VA), chairman of the House Committee on Education and Labor, introduced the Lowering Obstacles to Achievement Now (LOAN) Act earlier this week to “lower the cost of college for current and future student borrowers.”  The LOAN Act comes on the heels of the Responsible Education Assistance through Loan (REAL) Reforms Act introduced this summer by Ranking Member Virginia Foxx (R-NC). 

Both pieces of legislation were introduced in response to the Biden Administration’s plan to forgive student loan debt. The Republicans are opposed to the forgiveness proposal while the Democrats are supportive. 

The LOAN Act is a bill that seeks to build on the student loan forgiveness announcement by doing the following: 

• Doubling the Pell Grant over the next 5 years and making the program funded through mandatory (automatic) funds; 
• Allowing students to access more than the maximum Pell Grant if their student aid index (SAI) is equal to a negative amount;
• Setting the SAI at -$1,500 automatically for borrowers who receive a benefit under a means-tested federal benefit program;
• Giving access to federal student aid for dreamer students; 
• Extending the eligibility period from 12 semesters to 18 semesters for Pell Grant recipients;
• Reducing financial aid penalties around satisfactory academic progress determinations;
• Allowing graduate students to access the Pell Grant and subsidized loans;
• Repealing origination fees;
• Ensuring that repayments on loans go either toward loans with the highest interest rate or loans with the highest principal balance;
• Automatically enrolling borrowers into an income-driven repayment plan;
• Putting an automatic process in place for the recertification of income for borrowers;
• Decreasing the amount of required payments for forgiveness in the Public Service Loan Forgiveness Program from 120 to 96;
• Eliminating interest capitalization;
• Lowering interest rates; and 
• Creating a new program that will allow the Department of Education to issue a Federal Direct Refinanced Private Loan to borrowers with private loans. 

The student loan debate is expected to continue through the November elections. 

For more information, please contact:
Emmanual Guillory