Senators Reintroduce Institutional Risk Sharing Bill

Senators Jeanne Shaheen (D-NH) and Todd Young (R-IN) reintroduced the Student Protection and Success Act, which is their version of institutional risk-sharing.

The bill would determine federal loan eligibility for institutions based on their cohort repayment rate, a new calculation described in the bill as the percentage of students who have federal student loans, are not in default, and make at least a one-dollar reduction in their initial loan principal before the end of the third fiscal year after entering repayment.

In short, the bill, which Shaheen and Young also introduced in 2019 and 2022, would:

• Remove an institution’s federal loan eligibility when less than 15% of their former students begin repaying their loans within three years of leaving school, based on a new calculation called the “cohort repayment rate”;
• Mandate institutional risk-sharing payments based on a percentage of what their prior students were unable to repay on their federal loans; and
• Redirect these risk-sharing payments in the form of performance-based grants to other institutions with a cohort repayment rate above 25 percent, with the grant amount based on Pell student enrollment, repayment rates, and spending on student services.

If an institution falls under the 15% threshold, it would be deemed ineligible for Title IV aid for three fiscal years. These repayment rates would be published annually by the Department. Additionally, eligibility for the Pell Grant program and other federal student aid programs would be contingent on passing this cohort repayment rate threshold.

While the bill predates the College Cost Reduction Act passed by the House Committee on Education & the Workforce earlier this year, both bills would require certain institutions to pay a fee for a portion of their former students’ loan costs and use the money to redistribute funds to other institutions that meet the bills’ performance criteria.

For more information, please contact:
Justin Monk