Senator Tom Cotton (R-Arkansas) today introduced the Student Loan Reform Act of 2022, a bill that will reduce the cost of tuition by holding colleges financially responsible for the loans they encourage students to take.
Specifically, the bill requires that colleges become guarantors of up to 50 percent of future federal student loans and fines colleges 25 percent of the value of future defaulted loans. This will force colleges to have a financial stake in their student’s success, strongly incentivizing them to offer reasonably priced and useful degree programs.
The bill will also force any university charging over $20,000 a year for undergraduate tuition to gradually eliminate 50 percent of their administrative staff to qualify for future student loans. Bill text is here.
“America does have a student loan problem. But it’s not the problem Joe Biden wants you to believe it is. The real issue with student debt today is that the cost of college tuition has skyrocketed, yet the value of a college diploma has plummeted. What’s worse is the federal government created this problem by writing blank checks to colleges, with little effort to control the cost or quality of higher education. My Student Loan Reform Act of 2022 would end this academic Gilded Age, reduce the cost of tuition, and give colleges a much-needed reality check,” wrote Cotton.
A brief overview of the bill is below.
The bill would:
· Require any university with undergraduate tuition fees above $20,000 to gradually eliminate up to 50% of their administrative staff to be eligible for future student loans, excluding religious colleges and medical colleges
· Require the richest private colleges to distribute at least five percent of their endowment to support their educational mission per year, or else face a penalty
· Penalize universities up to 25% of a borrower’s loan for every one of their students who defaults on student loans
· Require universities to act as loan guarantor for up to 50% of any future federal student loans
· Place a luxury tax of 20% on annual undergraduate tuition fees above $40,000 with the funds raised being used for workforce training, excluding religious colleges and medical colleges
· Eliminate Plus loans, except for medical and dental students and parents of undergraduates, who would have loans capped at a $10,000 loan per year
· Require universities to implement admission and hiring policies that protect political and ideological diversity on campus
· Ban universities from soliciting FASFA paperwork from families who choose not to use financial aid
· Levy a one-percent tax on the fair market value of endowments held by the richest private colleges. The tax would apply to private colleges that 1) have more than 500 full-time enrolled students, 2) have endowments worth more than $2.5 billion and $500,000 per full-time enrolled student, 3) do not have a religious mission.