Dive Brief:
- Sens. Jeanne Shaheen (D-NH) and Orrin Hatch (R-UT) on Wednesday introduced a bill that would create new criteria for calculating unacceptable student loan default rates and substantially shorten the appeals process for institutions.
- The Student Protection and Success Act would count the portion of students who don’t pay a dollar or more toward the principal of their federal student loans for three years, sanctioning schools with overall repayment rates more than 10% below the national average over that three-year period.
- The appeals process to stave off the loss of Title IV federal dollars would be clipped from up to a year to just 75 days.
Dive Insight:
Besides changing the default rate calculation and appeals process, the new bill would also establish a fund into which schools with high student loan default rates would pay. The money would be funneled toward schools serving low- and moderate-income students, which the senators argue will properly incentivize schools and provide more support to those institutions serving needier students.
This bill would amend the Higher Education Act. The Senate Committee on Health, Education, Labor, and Pensions has already been discussing ways to revise the cohort default rate calculation. Sen. Lamar Alexander (R-TN), the committee’s chairman, has suggested a different fund — the Federal Student Aid Insurance Fund — that schools with high default rates pay into as a form of accepting liability for their students’ outcomes.