New legislation would require colleges to repay some federal student loans for their students if they default on debt payments. Sen. Josh Hawley, R-Mo., introduced a bill Wednesday that also allows borrowers to discharge their student loans via bankruptcy.
The “Make the Universities Pay Act” would require institutions of higher education to be liable for 50% of their students’ loans. The universities are prohibited from raising tuition rates to cover this new liability “unless there is an equivalent percentage decrease in administrative expenses at the institution.”
“For decades, universities have amassed billion-dollar endowments while teaching nonsense like men can get pregnant. All while charging extortionary tuition,” Hawley told the Daily Caller. “Now Joe Biden wants to give away another $1 trillion to prop up the system. That’s wrong. Instead it’s time to put universities on the hook and give students the information they need to make informed decisions.”
Hawley’s legislation would also allow student loan debt through the Federal Direct Student Loan Program to be discharged in personal bankruptcy. Federal law currently does not allow student loans to be considered in bankruptcy proceedings.
Any undergraduate student loan in default five years after the first payment is due will be eligible for discharge in bankruptcy, and after 15 years for graduate student loans.
In addition to increased liability, colleges and universities would be required to publish their graduates’ career outcomes. The mean and median earnings of graduates at the one-year, five-year, and 15-year marks after graduation would be released to the public.
Hawley introduced the legislation in response to President Joe Biden’s announcement that he would use executive powers to forgive $10,000 for each student loan borrower, and up to $20,000 per borrower who received a Pell Grant.
Analysts expect Biden’s program to cost the federal government anywhere from $500 billion to $1 trillion, according to The Wall Street Journal. Republican-aligned think tanks like the Heritage Foundation criticized Biden’s student loan forgiveness program for transferring debt to American taxpayers.
Lindsey Burke and Adam Kissel of the Heritage Foundation said that student loan forgiveness does nothing to address the rising costs of college, and instead will exacerbate them.
“The possibility of future bailouts will drive more students to take on higher debt burdens, which many colleges will gladly encourage for the sake of increased tuition,” said Burke and Kissel.
Congressional Republicans have criticized Biden for his recent actions to confront the student loan crisis while Democrats have increased talk of lowering interest rates and enlarging student loan forgiveness eligibility.