Bill Overview
Title: Student Loan Reform Act of 2022
Description: This bill makes various changes to the federal student loan system, including by imposing a penalty on institutions of higher education for borrowers who default on student loans and prohibiting new Federal Direct PLUS Loans from being made to student loan borrowers (with an exception for parent borrowers and covered health care students) on or after July 1, 2023. The bill also addresses expressive activities (e.g., peacefully assembling, distributing literature, or carrying signs) on campuses.
Sponsors: Sen. Cotton, Tom [R-AR]
Target Audience
Population: Federal student loan borrowers
Estimated Size: 43000000
- Federal student loan borrowers, particularly those with Direct PLUS Loans, will be affected.
- Students and institutions participating in the federal student loan system will see changes in loan availability and conditions.
- Institutions with high default rates may face financial penalties.
- Borrowers who default on federal student loans may indirectly influence the operations of their educational institutions.
- The limitation on Direct PLUS Loans impacts borrowers after July 1, 2023, notably excluding prospective students this date onward from eligibility unless they fall into the parent or covered health care student categories.
Reasoning
- The Student Loan Reform Act of 2022 mainly affects federal student loan borrowers, especially those who are reliant on Direct PLUS Loans. The prohibition of new Direct PLUS Loans from July 1, 2023, onward means that affected students will need to find alternative financing or restructuring options.
- Institutions with high default rates could face penalties, potentially leading to changes in policy or tuition for future students. These institutions might introduce new financial advising services to help students manage loans better.
- Wellbeing impacts are expected to vary: borrowers graduating around 2023 might experience strains in securing necessary financing, while institutions could undergo financial restructuring. Additionally, the inclusion of freedom of expression protections on campuses is likely more relevant to organizational campus activities and student engagement.
- Given its budget constraints, the policy cannot cover all affected individuals, necessitating a focus on borrowers with imminent impacts, like those planning to use Direct PLUS Loans. A limited budget also implies prioritization of implementing penalty structures and campus engagement policies.
Simulated Interviews
Graduate student (Austin, TX)
Age: 23 | Gender: female
Wellbeing Before Policy: 6
Duration of Impact: 3.0 years
Commonness: 3/20
Statement of Opinion:
- I am concerned about how the loss of Direct PLUS options will impact my final year of school and beyond.
- Also worried about how my school might change tuition or services in response to increased pressure.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 6 |
| Year 2 | 5 | 6 |
| Year 3 | 5 | 7 |
| Year 5 | 6 | 8 |
| Year 10 | 7 | 9 |
| Year 20 | 7 | 9 |
Undergraduate student (Chicago, IL)
Age: 19 | Gender: male
Wellbeing Before Policy: 7
Duration of Impact: 4.0 years
Commonness: 5/20
Statement of Opinion:
- I'm a bit worried about how this might limit my future loan options, especially if I need to exceed the cost that Direct subsidized loans cover.
- Hoping my university won't face penalties that could affect my fees.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 7 |
| Year 2 | 7 | 7 |
| Year 3 | 7 | 8 |
| Year 5 | 8 | 9 |
| Year 10 | 9 | 10 |
| Year 20 | 9 | 10 |
Educational administrator (New York, NY)
Age: 30 | Gender: female
Wellbeing Before Policy: 8
Duration of Impact: 5.0 years
Commonness: 4/20
Statement of Opinion:
- I'm optimistic about this policy encouraging better financial habits among students, but implementation will require more resources from our side.
- Concerned that penalties might pressure us to prioritize loan servicing over other educational improvements.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 8 |
| Year 2 | 7 | 8 |
| Year 3 | 8 | 9 |
| Year 5 | 8 | 9 |
| Year 10 | 8 | 9 |
| Year 20 | 8 | 9 |
Parent of college-bound student (Los Angeles, CA)
Age: 48 | Gender: male
Wellbeing Before Policy: 5
Duration of Impact: 2.0 years
Commonness: 3/20
Statement of Opinion:
- I welcome any policies that might curb overall tuition increases because our family needs loans for college tuition.
- Hoping the provisions around campus freedom of expression are not too disruptive.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 5 |
| Year 2 | 6 | 6 |
| Year 3 | 7 | 6 |
| Year 5 | 7 | 7 |
| Year 10 | 8 | 8 |
| Year 20 | 8 | 9 |
Middle school teacher (Houston, TX)
Age: 27 | Gender: female
Wellbeing Before Policy: 6
Duration of Impact: 0.0 years
Commonness: 6/20
Statement of Opinion:
- Given that I graduated a few years back, this policy doesn't affect me directly, but I'm curious how it might affect new teachers entering the workforce.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 6 |
| Year 2 | 7 | 7 |
| Year 3 | 7 | 7 |
| Year 5 | 8 | 8 |
| Year 10 | 8 | 8 |
| Year 20 | 8 | 8 |
College student (Miami, FL)
Age: 22 | Gender: male
Wellbeing Before Policy: 9
Duration of Impact: 0.0 years
Commonness: 4/20
Statement of Opinion:
- I haven't had to rely on loans yet, so this change doesn't seem to affect me much.
- I suppose it might affect friends who planned to use PLUS loans, though.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 9 | 9 |
| Year 2 | 9 | 9 |
| Year 3 | 9 | 9 |
| Year 5 | 9 | 9 |
| Year 10 | 9 | 9 |
| Year 20 | 9 | 9 |
Tech worker (San Francisco, CA)
Age: 33 | Gender: other
Wellbeing Before Policy: 7
Duration of Impact: 1.0 years
Commonness: 2/20
Statement of Opinion:
- I'm glad I graduated before these changes took effect, but I do worry about future loans for education within this shifting landscape.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 7 |
| Year 2 | 7 | 7 |
| Year 3 | 7 | 7 |
| Year 5 | 8 | 8 |
| Year 10 | 8 | 8 |
| Year 20 | 7 | 8 |
Financial aid officer (Denver, CO)
Age: 40 | Gender: female
Wellbeing Before Policy: 7
Duration of Impact: 5.0 years
Commonness: 3/20
Statement of Opinion:
- The penalties may provide a necessary jolt to improve default rates, but we've got to stay vigilant about supporting affected students.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 7 |
| Year 2 | 6 | 7 |
| Year 3 | 7 | 8 |
| Year 5 | 8 | 8 |
| Year 10 | 8 | 9 |
| Year 20 | 8 | 9 |
High school senior (Boston, MA)
Age: 18 | Gender: male
Wellbeing Before Policy: 8
Duration of Impact: 4.0 years
Commonness: 5/20
Statement of Opinion:
- My main concern is how to afford college without certain loans, though I still have other federal options available.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 8 |
| Year 2 | 7 | 8 |
| Year 3 | 8 | 9 |
| Year 5 | 9 | 9 |
| Year 10 | 9 | 10 |
| Year 20 | 9 | 10 |
Intern (Seattle, WA)
Age: 24 | Gender: female
Wellbeing Before Policy: 7
Duration of Impact: 1.0 years
Commonness: 3/20
Statement of Opinion:
- I am not directly affected but worried about how these changes may alter job markets with pressures on institutions.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 7 |
| Year 2 | 8 | 8 |
| Year 3 | 8 | 8 |
| Year 5 | 8 | 8 |
| Year 10 | 9 | 9 |
| Year 20 | 8 | 9 |
Cost Estimates
Year 1: $50000000 (Low: $40000000, High: $60000000)
Year 2: $51000000 (Low: $41000000, High: $61000000)
Year 3: $52000000 (Low: $42000000, High: $62000000)
Year 5: $54000000 (Low: $44000000, High: $64000000)
Year 10: $60000000 (Low: $50000000, High: $70000000)
Year 100: $70000000 (Low: $60000000, High: $80000000)
Key Considerations
- The bill's impact depends heavily on how effectively institutions respond to penalties associated with defaults.
- The removal of new PLUS loan originations for students could drive some to seek alternate funding methods, impacting colleges' financial plans.
- Potential savings can offset administrative costs, but only if institutions actively reduce default rates.
- Monitoring and enforcement costs are uncertain and could impact net savings.