Last week, House Republicans released the full text of the PROSPER Act, a bill that proposes dramatic changes to the financing of higher education — including the elimination of student loan forgiveness programs.
Here’s a breakdown of the bill and how it could affect you.
What is the PROSPER Act?
The Promoting Real Opportunity, Success, and Prosperity through Education Reform (PROSPER) Act was introduced by Rep. Virginia Foxx (R-N.C.) and Rep. Brett Guthrie (R-Ky.).
“We need a higher education system that is designed to meet the needs of today’s students and has the flexibility to innovate for tomorrow’s workforce opportunities,” tweeted Foxx. “The PROSPER Act is higher education’s long-overdue reform.”
If approved, it would be “the biggest overhaul of education policy in decades,” according to The Wall Street Journal.
Here are some of the most striking provisions of the bill:
- Simplification of the Free Application for Federal Student Aid (FAFSA)
- “Wind-down” of the Federal Perkins Loan Program
- Reduction of available repayment plans
- Changes to the amount students and parents can borrow
- Elimination of federal student loan origination fees
- Increase in funding for community colleges and apprenticeships
- Elimination of rules — such as 90/10 and gainful employment — that regulate for-profit institutions
Reactions from higher education experts haven’t been positive, with many saying the bill will mainly benefit for-profit schools.
“Increasing the already heavy burden of student debt and gutting critical protections for students and taxpayers will not promote ‘real opportunity, success, and prosperity,’” said Debbie Cochrane, vice president of The Institute for College Access and Success (TICAS), in a statement.
“Make no mistake,” she continued, “this bill would close the door to a quality higher education and economic mobility for those who need it most.”
How student loan forgiveness could change
For people who’ve already borrowed money for college, the biggest blows come to student loan forgiveness programs.
Under current income-driven repayment (IDR) plans, loans are forgiven after 20 to 25 years of payments. Under the new plan, interest would be capped after 10 years of payments — but borrowers would never receive forgiveness.
Also on the chopping block is the Public Service Loan Forgiveness (PSLF) Program, which allows borrowers working at nonprofit or government agencies to have their loans forgiven after 10 years of regular payments. The House bill eliminates this program entirely.
Will these changes affect you?
If you’re currently seeking forgiveness through one of these programs, you might find this news alarming.
But changes to IDR and PSLF will affect only borrowers who enroll after June 2018, according to The Washington Post. In other words, if you’re already on track to receive forgiveness, you don’t need to worry.
If you’re in school, however, and contemplating a public service career or IDR plan with the hope that your loans will eventually get forgiven, you should track this bill as it moves through Congress.
It goes to the Senate next and reportedly could take more than a year to work its way through. The final version is likely to look “vastly different” from the current legislation, according to The Chronicle of Higher Education.
One reason is the fact that members of the Senate’s education committee have said they’ll pursue a bipartisan proposal — a striking change from the current bill, which was written with little input from Democrats.
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1 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 5.87% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 5.87% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of Month/Day/Year, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 08/21/18. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at firstname.lastname@example.org, or call 888-601-2801 for more information on ourstudent loan refinance product.
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2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
Savings example: average savings calculated based on single loans refinanced from 9/2013 to 12/2017 where borrowers’ previous rates were disclosed. Assumes same loan terms for previous and refinanced loans, and payments made to maturity with no prepayments. Actual savings for individual loans vary based on loan balance, interest rates, and other factors.
Application detail: 5 minutes indicates typical time it takes to complete application with applicant information readily available. It does not include time taken to provide underwriting decision or funding of the loan.
Instant rates mean a delivery of personalized rates for those individuals who provide sufficient information to return a rate. For instant rates a soft credit pull will be conducted, which will not affect your credit score. To proceed with an application, a hard credit pull will be required, which may affect your credit score.
Total savings calculated by aggregating individual average savings across total borrower population from 9/2013 to 12/2017. Individual average savings calculation based on single loans refinanced from 9/2013 to 12/2017 where borrowers’ previous rates were provided. Assumes same loan terms for previous and refinanced loans, and payments made to maturity with no prepayments. Actual savings for individual loans vary based on loan balance, interest rates, and other factors.
3 Important Disclosures for SoFi.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.47% – 6.99%3||Undergrad & Graduate|
|2.47% – 5.87%1||Undergrad & Graduate|
|2.47% – 8.03%4||Undergrad & Graduate|
|2.95% – 6.37%2||Undergrad & Graduate|
|2.48% – 6.25%5||Undergrad & Graduate|
|2.72% – 8.32%6||Undergrad & Graduate|