Usually, when you simplify something, it gets easier. But not when you are the federal government, and not when it comes to the labyrinthian student aid system. Simplifying the Free Application for Federal Student Aid—the gateway to federal loans, grants, and more—has turned into a bureaucratic debacle, with the upshot that aid decisions will be made much later than usual for families in the midst of important college decisions.
The major underlying causes of this meltdown are that the federal government is mammoth and the whole darned system is absurdly complex. These might be problems the Framers hoped to avoid with the Constitution giving the federal government no authority to meddle in education.
The College Cost Reduction Act (CCRA), just passed through the House Committee on Education and the Workforce, could have been committed to streamlining the system. It could have targeted many programs for elimination, added no new ones, and kept what remained simple—“simple” defined as money following students to colleges without the feds trying to decide what schools and programs are worthy, and expecting loans to be repaid with interest.
Alas, the bill strays significantly from these guidelines, but it would probably be an improvement over the status quo. What follows are major highlights and lowlights.
On the positive side, the CCRA would eliminate and streamline some things, first and foremost ending PLUS loans. These loans, which can be taken by graduate students and parents of undergraduates, have no set maximums, so they supply major fuel for college price inflation. The CCRA would also end the Federal Supplemental Educational Opportunity Grant (FSEOG) and Leveraging Educational Assistance Partnership (LEAP) programs, which give federal dollars to colleges and states, respectively, to give to students. The bill would also pare down the alphabet soup of loan repayment options, reducing them to one 10‐year plan and one income‐driven.
The CCRA would also reduce some regulations, including the “90/10” rule that says no more than 90 percent of a school’s revenue can come through federal aid programs, and “gainful employment” regulations, which threaten to end access to aid for schools whose graduates do not earn enough money, as defined by the feds. Both are targeted at the relatively small and politically disliked for‐profit college sector, though 91 percent of young people—not just those attending or planning to attend proprietary schools—say that future employment is a major reason they are going to college.
The bill would also improve accreditation, opening it up so that new, non‐traditional schools can more easily get accredited and, hence, become accessible to students with federal aid. Right now, there are mainly regional, input‐focused accreditors that tend to favor brick‐and‐mortar, how‐many‐volumes‐in‐your‐library institutions, making it harder for new models such as online, or competency‐based institutions, to compete.
Finally, on the plus side, the CCRA would rein in the ability of the US Secretary of Education to unilaterally declare changes to how loans are repaid, at least if they would cost the government more. That would help to block the sort of unconstitutional student debt cancellation actions the Biden administration has repeatedly taken.
Unfortunately, a lot of the good in the bill is offset by the bad. For instance, rather than just ending funding for school and state grants, the bill would create a Promoting Real Opportunities to Maximize Investments and Savings in Education (PROMISE) program that would give colleges money akin to FSEOG. The bill would also establish “Pell Plus”—additional funding for Pell Grant recipients—but only for students on pace to finish on time, in eligible programs, and that hit a “value‐added” earnings threshold. Both programs require that participating colleges lock in maximum prices for students for up to six years—a problem if students enter in 2025 and the country experiences major inflation any time before 2031.
The CCRA also has a “skin in the game” requirement—basically, colleges would cover some losses when their graduates fail to repay their loans—which is reasonable given that colleges make money no matter how their students fare. But it is something of a distraction: It is the federal government’s failure to meaningfully assess potential borrowers’ abilities to handle degree programs that puts money in the hands of students unlikely to finish. Schools are just doing what the feds incentivize them to do—enroll students—and this places the blame on the institutions, not the politicians where it belongs.
Regarding loans, the act would end interest capitalization, in which unpaid interest is added to a loan’s principle. That hurts taxpayers, especially as inflation lowers the value of a dollar over time. It also complicates lending, which should be simple: you borrow with interest and pay back the principal and interest accrued.
Finally, while the accreditation changes are perhaps more freeing overall, the CCRA includes micromanagement, such as requirements to use specific outcomes measures, having at least one representative of the business community on an accreditor’s board, and a prohibition on diversity, equity, and inclusion mandates. Such decisions should be up to accreditors and schools, not the feds.
Overall, the CCRA would take us closer to where we need to be—ideally, no federal aid—but it could go much further.