Congress Could Make Paying for College Even More Complicated

Ask any parent or prospective student and they’ll likely tell you that between opaque financial aid calculations, questions about degree value and the murky student loan system, paying for college is not a straightforward process. Experts warn that if Congress moves forward with new higher education reforms, it could get even more difficult to navigate.

Late last month, House Republicans put forward a plan that would significantly alter how colleges and families calculate cost and put a number of new limits on federal financial aid eligibility. Among other changes, the legislation would create a national college cost estimate by degree program, put individualized caps on federal loans and limit Pell eligibility for part-time students.

Jennifer Zhang, a research associate at the Student Borrower Protection Center, said many of those provisions are going to make a system that’s already difficult to navigate labyrinthine.

“How are you going to save up for college if you don't know how much college is going to cost, or how much federal loans you’re going to be able to take out next year?” she said. “Under the guise of trying to drive down the cost of college, this bill is actually doing the opposite.”

Some of the changes in the bill are remnants from the College Cost Reduction Act, which failed to make it to the House floor last year after aggressive lobbying from higher education associations. Many of those same organizations have written in strong opposition to the new bill as well, including the Association of Public and Land-Grant Universities and the Association of Community College Trustees.

The proposal is part of a broader effort to cut spending in order to pay for President Trump’s new tax cuts and other priorities. A House committee approved the plan last month, but it still needs to pass the full House and is likely to be amended in the Senate, where changes to financial aid programs like the Pell grant might face more pushback.

But as Congress sees higher education spending as a key belt-tightening area to pay for the Trump administration’s agenda as part of the reconciliation process, students and financial aid offices should expect some of the proposed changes to make it into the final bill.

Muddying the Waters

Historically, colleges have calculated their own cost of attendance, which usually applies to all undergraduate students. Under the proposed legislation, they’ll be required to report their estimates to the federal government and break them down by program.

Those numbers will then be used to calculate a different estimate called the Median Cost of College, which would establish national benchmarks for the cost of degree programs nationwide. The median cost would then determine how much students can borrow and, Republicans say, hold colleges accountable for the price of their programs. That estimate would likely be different than cost of attendance figures that students and families currently see.

“If you thought it was difficult to understand the cost of college before, just wait,” said Rachel Fishman, director of the higher education program at the left-leaning think tank New America. “Now you’re going to have to explain to families why there are two estimated costs for every program.”

Zhang said the new median-cost–reporting requirements would also put an enormous burden on colleges, most of which don’t have readily available cost of attendance data broken down by program. With financial offices facing historic staffing shortages and growing demands, colleges with fewer resources could be overwhelmed.

“This data is not out there on a program level, and it’s going to be an administrative nightmare to calculate,” she said.

Supporters of the bill say the median-cost benchmark will serve as a kind of consumer price index for degree programs for families, allowing them to compare the cost of one program against national rates.

“This might give families a little more context for what typical programs cost nationwide,” said Preston Cooper, a senior fellow at the right-leaning American Enterprise Institute. “If their school is charging significantly more than the median cost for similar programs, maybe that’s a red flag and they should start looking elsewhere.”

The problem, Fishman said, is that colleges use different factors to estimate their costs. State institutions have tuition freezes, some colleges have more overhead research costs or more capacity to give scholarship funding; some serve more low-income students who pay less on average because they qualify for more financial aid. Any benefits of a national cost benchmark, she said, is likely to be outweighed by the sheer confusion that comes with it.

“I believe that the proponents of this bill thought it would make college costs more transparent,” she said. “But really, these changes just raise a whole host of questions for families.”

A Boon for Private Lenders

The reconciliation proposal would also put new limits on federal loans for students, severely restricting Parent PLUS loans and restricting the amount of federal loans students can receive.

To complicate the issue even further, those loan caps would vary based on a number of factors: a student’s income level and estimated family contribution; average program cost; and yearly changes to loan eligibility. Zhang said that if students enter college with one figure for their loan eligibility and go into their second or third with a drastically different one, they’ll be much more likely to turn to private lenders to make up the gap—or to drop out altogether.

“If they fall below the cap, students will now have to make up the difference through private loans, around 90 percent of which require a co-signer with good enough income and assets,” she said. “So this is going to cut out low-income students, students who can’t get co-signers and people who aren’t willing to take out a private loan.”

Cooper believes the bill’s reforms would make students less likely to turn to private lenders by incentivizing colleges to graduate students with less debt. He added that critics of the bill are exaggerating its impact on student borrowers: he said only seven percent of current undergraduates would be affected by the loan caps, and that most of them are on Parent PLUS loans—which, he said, are “already a bad deal to begin with.”

“You see Democrats out there saying that this will prevent half of students from getting the aid they need, and I think those assertions are not really grounded in reality,” he said. “We have loan limits now, and in most cases the House bill would increase those on the undergraduate side.”

Zhang said that’s an inaccurate portrayal of the loan caps’ impact.

“This is going to lead families into more student debt,” she said. “It's going to make things a lot more complicated and unpredictable and, at the end of the day, more expensive.”

Changes to Pell Eligibility

To address a looming $2.7 billion Pell grant shortfall, the reconciliation bill puts $10.5 billion into the program over the next three years, but lawmakers also proposed limiting eligibility for the grants.

The bill would require Pell recipients to enroll in a minimum of 15 credit hours per semester in order to be eligible for the full-time grant award and a minimum of six credits to receive any award at all. College access advocates say that would take federal aid away from many of the students most in need of it, like low-income community college students with full-time jobs or single parents returning to school.

“This proposal is going to cut or eliminate Pell grants for 61 percent of recipients; one in seven could lose their reward entirely,” Zhang said. “It’s going to make it much harder for the most vulnerable students to get a degree.”

Cooper believes the change would improve incentives for students to graduate faster and with less debt. Students who enroll in less than 15 credit hours, and thus take longer to finish their programs, are less likely to graduate than their peers. For Cooper, providing them with federal aid for what he said is often a fruitless pursuit is wasteful.

“If we have limited resources that we can put into the Pell program, shouldn’t we prioritize those that do the greatest good for students?” he said. “I think that’s the full-time pathway, which has a much stronger track record of success.”

At the same time, the bill would also expand Pell eligibility to students enrolled in short-term credential programs. Fishman said that the short-term Pell expansion combined with new restrictions on part-time students’ Pell eligibility could drive more low-income students away from full degree programs at community colleges and four-year institutions and toward short-term credentials with shadier costs and poor returns on investment.

Coupled with the Trump administration’s efforts to peel back regulations on institutions, Fishman said students could enter a more exploitative, expensive and opaque higher education landscape than ever before.

“It’s a perfect storm really,” she said. “There’s nothing to stop the bad consequences from coming for students, even if those consequences are unintended … There are no guardrails.”