Senators Shaheen, Hatch, Introduce Bipartisan Bill to Improve Quality of College Education

(WASHINGTON, DC) – Today, Senators Jeanne Shaheen (D-NH) and Orrin Hatch (R-UT) introduced bipartisan legislation to improve the quality of college by strengthening the federal standard by which colleges are eligible for federal student aid. The Student Protection and Success Act would help address the interrelated problems of the questionable quality of many college degrees, the high number of students dropping out of college nationwide, and the high number of graduates and non-graduates who are not paying down their college loans. The nation's college drop-out rate is 40 percent at four-year institutions and the amount of federal loans that are in default, forbearance, or deferment as a result of economic hardship or unemployment is up to $110 billion. Despite this, last year the Department of Education, as the result of a poor standard for evaluating the quality of colleges, only sanctioned 21 schools for high default rates and 12 of those were beautician schools. 

“Students take on college loans on the assurance that they’re worth the investment in their future,” said Shaheen. “However, the promise of a college education is eroding as more and more students either drop out or graduate with a degree that doesn’t lead to a good job. It's time to hold colleges accountable for this nationwide problem. The Student Protection and Success Act will take long-overdue steps to weed out poorly performing institutions who are good at getting students to enroll, but exceptionally poor at preparing students for the workforce and, therefore, shouldn’t be subsidized by federal assistance. This legislation will incentivize colleges across the country to improve the quality of their programs.”

“College students deserve some assurance that their investment in education through loans will prepare them to be both competitive in the workforce and able to repay their debts,” Hatch said. “Schools that are not producing these returns are not good stewards of taxpayer dollars, and should be responsible for helping recuperate some of the money borrowed. We can argue that the cost of college is too high, but as long as the education prepares the student to enter the workforce and receive a substantial return on this cost, we can rest assured that the cost is merited. The dream of a college education should not come tied to an insurmountable mountain of debt, especially if the education it pays for does not provide the most basic skills and education to conquer it.”

A recent study has found that many students graduate college without achieving many of the skills necessary to be competitive in the workforce, such as critical thinking, complex reasoning, or writing. Borrowers leaving school without these skills often struggle to find meaningful employment opportunities, and in turn, struggle to repay their student loan debt. 

The federal government's metric for determining an institution’s eligibility for Title IV Federal Student Aid dollars is based on the percentage of students from a school who default on their loans, which generally means not making a payment in more than 270 days. Schools with default rates above 30% over three years or 40% over one year can lose their eligibility to accept federal loan funding.  But some schools use loopholes and hire default management firms to push students into costly loan deferment or forbearance programs that harm students but protect schools from any accountability. Schools found in violation of the federal standard can have their appeals process last up to a year, all the while continuing to allow students to borrow loans to study at their institution. 

The Student Protection and Success Act replaces this flawed standard with a more robust formula that would measure the percentage of students at each school who go three years without making a payment of one dollar or more towards the principal of their federal loans. This new metric would include students who are in default, discretionary forbearance, income-driven repayment plans, and deferment for reasons of financial hardship or unemployment. It makes exceptions for qualified borrowers such as those attending graduate school or serving in the military or the Peace Corps. Under the bill, schools with repayment rates more than 10% below the national average over a 3-year period will lose eligibility to participate in the Title IV federal student loan system, and the appeals process is shortened substantially to no more than 75 days.

The bill would also establish a risk-sharing program under which many schools with student loans that are not being repaid will have to contribute to a fund to support institutions that serve a high percentage of low- and moderate-income students. Through this system, the incentives of colleges will be better aligned with the incentives of their students, and more support will be provided for schools that serve the neediest students.

The bill text is available here.

New Hampshire has the highest average student loan debt in the nation at $32,795.