Republican higher education bill clears first hurdle

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WASHINGTON (AP) — Republican legislation making its way through Congress goes after a number of key student loan subsidies and deductions, and critics say it could make college less affordable for millions of Americans.

A rewrite of the nation's main law governing higher education that passed the House Committee on Education and the Workforce late Tuesday would eliminate subsidies for interest payments on federal student loans while the students are in college. The American Council of Education estimates the change would affect 6 million students.

And new graduates would not be able to participate in the Public Service Loan Forgiveness program, a program launched in 2007 with the aim of motivating students to take government and teaching jobs in remote rural areas.

At the same time, tax legislation passed by the House aims to eliminate tax deductions for interest payments when students start repaying loans.

Jason Delisle, resident fellow at the conservative American Enterprise Institute, says the loss of the deduction for student loan interest would be offset by the higher education bill's elimination of the fee that students now pay to take out a federal loan.

The fee is around $120 on a $10,000 loan.

The higher education bill was approved after more than 10 hours of debate. Democrats complained that the bill was rushed through the committee just two weeks after it was introduced without giving them a fair chance to review and amend it.

But committee chairwoman Virginia Foxx, a North Carolina Republican, said the legislation "delivers the serious reforms needed to empower students and families to achieve an essential part of the American dream: earning a high-quality education, finding a good-paying job, and living a successful life."

The American Council of Education estimates that eliminating federally subsidized student loans would increase students' interest payments by 45 percent for a four-year degree and 87 percent for a four-year degree followed by a master's program.

"It is a bad bill for borrowers," said Terry Hartle, the group's senior vice president. "We are increasing the cost of college for students."

Hartle added that with more debt to repay after college, students will have to make more difficult decisions regarding what careers to pursue and whether to attend graduate school, get married and start a family.

"Educational debt affects post-college personal and professional choices: it's careers, it's graduate school, family formation, marriage; this would exacerbate that problem because students will be paying more money in educational debt every month," he said.

Under the bill, new borrowers would no longer be able to participate in the Public Service Loan Forgiveness program, which provides for forgiveness of remaining student debt if the person seeks a career in public service and makes 120 qualifying payments. Those already in the program would be grandfathered in.

Delisle said the bill could have done more to streamline the various federal student loan programs, but it's a step in the right direction.

"It's not bad," Delisle said. "I don't think it's the ideal way to restructure some of those programs, but it's certainly an improvement over what we have."

The bill also would strike two Obama-era regulations that protect students who are defrauded by for-profits colleges: the gainful employment provision, which requires career programs to provide students an education that would enable them to repay their debts, and the borrower defense regulation, which boosted student protections against fraud by for-profit institutions. The Education Department is now rewriting those rules and it's unclear how that process will be affected by the bill.

The bill also eliminates a provision, known as the 90-10 rule, which prohibits for-profit college from relying exclusively on revenues from federal loans and requires them to secure at least 10 percent of revenue from other sources. Critics say that provision worked as an important check on colleges' predatory practices.

"It is somewhat surprising how brazen the bill is in terms of reducing accountability and providing more taxpayer dollars to for-profit colleges without any strings attached," said Clare McCann, a higher education expert with the New America think tank. "The bill went out of its way to limit any kind of accountably for profits."

In a measure that enjoys broad support, the bill simplifies the process of applying for federal student aid. Students now are required to complete a cumbersome, 10-page long form, which may present an additional difficulty for low-income and first-generation students.

It was unclear when the bill would be considered by the full House. The Senate is now beginning to work on its own version of the bill.

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