WASHINGTON, DC – Seeking to protect students from unmanageable debt and make college more affordable, U.S. Senators Jack Reed (D-RI), Richard Durbin (D-IL), Elizabeth Warren (D-MA), and Chris Murphy (D-CT) are leading the charge to ensure that institutions of higher education take more responsibility for student indebtedness.  The Senators are once again introducing the Protect Student Borrowers Act to make institutions of higher education more accountable for their students’ ability to repay their loans by requiring them to assume some of the financial risk of student loan default.  The legislation will provide incentives and support for institutions to assist their students to effectively manage their debt.  It will also reduce defaults and the opportunity to increase the Pell Grant for students at institutions that enroll a high percentage of Pell Grant recipients and that have good student loan performance.

Across the nation, student loan borrowers struggle to repay their debts, and the problem is growing.  According to an analysis of student loan debt by the Federal Reserve Bank of New York, outstanding student loan debt increased to $1.46 trillion as of 2018, rising by $79 billion in that year alone.  Today, about 45 million Americans have student loan debt.  Skyrocketing debt levels in recent years have put a drag on the nation’s economy, and, as student loan debt has grown, a generation appears to be delaying buying homes or cars, starting a family, saving for retirement, or launching new businesses. 

With the stakes for students and taxpayers at such a high level, the Protect Student Borrowers Act would alleviate some of the pressure on borrowers by requiring institutions of higher learning to bear some of the risks in the student loan program.  Notably, the bill would hold colleges and universities accountable for student loan defaults by requiring them to repay a percentage of defaulted loans.  Only institutions which have one-third or more of their students borrow would be included in the bill’s risk-sharing requirements based on their cohort default rate, and risk-sharing requirements would kick in when the default rate exceeds 15 percent.  The institution’s risk-share payment would rise in accordance with its default rate.  The risk-sharing payments would be invested in helping struggling borrowers, preventing future default and delinquency, and increasing Pell Grants at institutions with low default rates that enroll a high percentage of Pell Grant recipients.

The Protect Student Borrowers Act also provides incentives for institutions to take additional, proactive steps to ease student loan debt burdens and reduce default rates, such as implementing comprehensive student loan management plans.  The Secretary of Education may also waive or reduce the payments for institutions whose mission is to serve low-income and minority students, such as community colleges, historically Black institutions, or Hispanic-serving institutions, provided that they are making progress in their student loan management plans.

“Universities provide a tremendous benefit to students, our economy, and our culture, but they often charge staggering amounts for tuition, which leads to heavy student debt.  We think it’s time for universities to step up and take some responsibility when it comes to student loan defaults,” said Senator Reed.  “Far too many college students leave school today with a staggering level of student loan debt to repay, and that debt is a burden that will affect their economic choices for years to come, including what career they’ll pursue, when and if they’ll buy a home, and whether they can afford to start thinking about a family.  We need to tackle student loan debt and college affordability from multiple angles, and all stakeholders in the system should be required to do their part.  We simply can’t take on the student loan debt crisis without institutions also stepping up and taking greater responsibility for college costs and student borrowing.  I urge my colleagues to cosponsor this bill and look forward to working with them to ease student debt and boost our economy.”  Reed has for years been at the forefront of legislative efforts to tackle the student loan debt crisis and improve college affordability for American students and their families.  He has held various workshops for Rhode Island students about how best to avoid student debt and encourages students each year to fill out the Free Application for Federal Student Aid (FAFSA) form to help them access all available financial aid.

“Students and federal taxpayers both face financial consequences when students default on student loans.  It’s time that institutions of higher education share the responsibility,” said Senator Durbin.  “Institutions having skin in the game will improve outcomes for both students and taxpayers.”

“Students and graduates are being crushed under an ever-growing mountain of debt, but colleges raise costs year after year and face no consequences when borrowers default on their students loans,” said Senator Warren.  “If we want colleges to pay more attention to rising costs and failing students, they need some skin in the game.”

“Too many colleges and universities are handing out degrees that aren’t worth the money students put into them, leaving students saddled with debt and unable to build their futures.  That has to stop.   Our bill provides incentives for colleges and universities to come up with innovative programs to help students manage the debt they incur while in school, and hold them accountable if they don’t,” said Senator Murphy.

In December 2018, Reed, Durbin, and Warren joined colleagues in writing to Secretary of Education Betsy DeVos to ensure students who use federal financial aid are not being charged unfair fees on financial products that institutions of higher education are paid to promote.