The Congressional Budget Office (CBO) last week issued its formal, 10-year cost estimate on the College Cost Reduction Act (CCRA). H.R. 6951, which would make major changes to the Higher Education Act (HEA), was approved by the House Education and the Workforce Committee on a party-line vote in January. CBO found that the legislation saves $185.5 billion over 10 years. (To put that figure in context, the Pell Grant program is estimated to cost $29.2 billion in the upcoming 2024-25 award year.)
Under House rules, the CBO “score” on the bill is necessary for the legislation to be brought up for floor action and may signal committee chair Virginia Foxx’s (R-North Carolina) intention to secure a vote. (A Washington Watch column earlier this month covered the committee’s own estimate of the risk-sharing and “Promise Grant” provisions.)
However, passage by the House is a tall order, given the razor-thin Republican House majority, along with widespread opposition from the higher education community and House Democrats. The American Association of Community Colleges (AACC) opposed the legislation when it came before the committee.
Although college officials have understandably focused on the bill’s risk-sharing elements, CBO’s cost estimate shows that the Foxx legislation has a much bigger fiscal impact in other areas, reflecting the bill’s sweeping policy changes, particularly around student loans.
Saving money by eliminating ‘SAVE’
Of the $185.5 billion estimated savings in H.R. 6951, by far the biggest chunk would come from repealing the Biden administration’s “SAVE” income-dependent repayment plan. The Saving On a Valuable Education plan is a cornerstone of President Joe Biden’s higher education agenda, especially after the Supreme Court scuttled the president’s broader, high-profile debt cancellation proposal last summer.
Community college students, who generally are low-balance borrowers, would benefit from a variety of the SAVE plan’s provisions, keeping in mind that only about 11% of them take out federal loans.
According to CBO, repealing SAVE would save some $127.3 billion over 10 years, representing more than two-thirds of the bill’s overall savings. In addition to replacing SAVE with a new income-driven repayment plan, Foxx’s bill would make several other changes to federal student loan programs, including to repayment terms and conditions.
AACC supports some of these changes, particularly limiting the total amount of repayment to the amount calculated under a standard 10-year repayment plan. CBO is also estimating that the authority granted to institutions to limit student borrowing in selected circumstances would be used, although specific savings were not provided.
Due to the controversy over the administration’s use of executive branch authority to establish the SAVE plans and to pursue broad student debt cancellation without Congressional action, CCRA includes a proposal to limit the education secretary’s ability to make any changes that add to the cost of the loan programs. CBO scores this as saving $30 billion over 10 years, anticipating future executive action on student loans. (Note: the Biden administration’s latest debt relief plan – currently released as a proposed rule – was not included in the CBO’s analysis, but likely influenced that figure).
Risk-sharing’s effect on borrowing
While the bulk of the savings are generated by the loan provisions, community colleges are most fixated on the bill’s risk-sharing provisions. CBO did not provide estimates of its potential effect on individual colleges or sectors. However, it did find that risk-sharing overall would reduce loan volume by about one-third — a staggering amount.
The CBO estimate states that “given the high cost of risk-sharing payments and the considerable uncertainty about that cost over the lifetime of any given loan, CBO expects that some institutions would take action to avoid making these payments: Some would choose not to participate in the federal student loan programs, others would close certain institutional programs, and still others would close altogether.”
Other key items
Another mammoth policy change in the bill is its elimination of the graduate and professional student PLUS loans, which allow those students to borrow the entire cost of attendance for their education without an aggregate cap. This policy has contributed to the fact that half of all new federal student loans are taken by these students when they only represent 16% of the overall college and university population.
Eliminating Grad PLUS would save the government $40.4 billion over 10 years. Under H.R. 6951, these students would be able to borrow larger amounts under the unsubsidized loan programs, but they would be capped in a way that the PLUS program is not.
The CBO analysis also looked at the savings associated with repealing the Gainful Employment and Financial Value Transparency Regulations (an action that would bring smiles to the faces of scores of community college administrators). Other topics “costed-out” included the establishment of a new postsecondary education data system, updating the Education Department’s College Scorecard and developing a new financial aid offer form, all items included in Foxx’s bill.
AACC will keep its members informed about this legislation as it potentially goes before the full House.
