House Education Bill Would Weaken Borrower Protections, Leave Students Vulnerable to Predatory and Low-Quality Institutions

On April 29, the House Committee on Education and Workforce considered their portion of the larger Republican budget reconciliation effort to identify $1.7 trillion in spending cuts to cover a portion of extending lower tax rates for the wealthiest Americans. As my colleagues have noted elsewhere, the so-called Student Success and Taxpayer Savings plan, advanced out of committee on party-line votes by the Republican majority, would make college less accessible and loan repayment more expensive—effectively putting college dreams farther out of reach for low- and middle-income students. But the legislation—which would cut an estimated $350 billion from higher education support—would also make college a riskier investment for all students by erasing or weakening important student and borrower protections.

Under the guise of regulatory relief, the proposal passed by the House committee would strike a critical protection for taxpayers and student veterans against scam colleges, eliminate a decades old federal law requiring that career preparation programs actually prepare people for living wage job opportunities, and add hurdles to debt relief for student loan borrowers whose colleges use deceptive recruitment tactics.

The Student Success and Taxpayer Savings Plan would not only increase the cost of college and make loan repayment more burdensome for borrowers. It would also make enrollment in higher education much riskier, especially for low-income students, students of color, and veterans. TICAS has issued an action alert to tell members of Congress to reject this misguided effort to defund students to pay for tax cuts for the wealthiest Americans.

Reopening the Door to Exploit Student Veterans

The House bill would revoke a longstanding provision in the Higher Education Act known as the 90/10 rule, which prevents predatory schools from targeting student veterans for their GI Bill benefits. The 90/10 rule requires for-profit colleges to generate at least 10 percent of their revenue from non-government sources. Public and private nonprofit institutions have a variety of revenue streams, but without the 90/10 rule, for-profit colleges could exist solely off taxpayer dollars. A previous version of the rule opened a loophole that did not count veterans’ educational benefits as federal aid, creating an incentive for predatory schools to aggressively recruit student veterans into often low-quality, high-cost programs. Predatory schools drained their student veterans’ benefits without setting them up for career success.

In 2021, a bipartisan agreement closed this loophole. Yet the House committee’s bill would strike the common sense 90/10 rule entirely and pave the way for predatory schools once again to exploit our nation’s in pursuit of boosting revenues with the educational benefits they have earned through their service. As researchers at Brookings plainly noted in an analysis of the rule’s effect across sectors, “Eliminating the 90/10 rule would increase enrollment at lower-quality institutions and increase defaults.” Last May, the Congressional Budget Office estimated that repealing the rule would cost taxpayers $2 billion. Beyond the cost, doing so would harm student veterans, making the policy change a giveaway to predatory colleges while offering a bad deal to both taxpayers and students.

Removing Accountability for Low-Quality Career Programs

The Student Success and Taxpayer Savings Plan would also strike the expectation from federal law that training programs prepare their students for “gainful employment” in a specific career field. The long-time gainful employment (GE) rule sets the expectation that students who graduate from qualifying programs can earn enough to repay their student loans without undue burden and that their earnings exceed those of people employed in their fields who have not pursued postsecondary training. It’s a baseline expectation that students are not harmed by high-cost, low-quality programs.

The previous administration put the GE rule back in place after then-Secretary of Education DeVos rescinded the rule in 2019. That cut meant taxpayer-funded student financial aid flowed into the revenues of expensive, low-quality programs that failed to set their students up for career opportunities they intended to pursue. Rolling back the GE rule will again come at a significant cost to students and taxpayers. In May 2024, the Congressional Budget Office (CBO) estimated that rescinding the rule would cost more than $9 billion. Students and taxpayers would bear the consequences of this change to enable poorly performing college programs, disproportionately in the for-profit college sector, to collect federal money intended for student aid.

Keeping Students from Closed and Fraudulent Colleges in Debt

Beyond increasing risk for student veterans and students in career training programs, the House bill would roll back student protections strengthened through a series of negotiated rulemaking processes. Even though each month brings multiple college closures, this bill would weaken protections under the Closed School Discharge rule that provides debt relief for students whose institutions shutter. A college’s closure cuts in half its students’ chances of completing a degree anywhere, leaving many with debt but no degree and little chance of repaying their loans. Rather than recognizing the harm done to student borrowers by school closures, the House Republican plan would revert to a rule making it harder for them to receive the relief Congress intended to provide in the Higher Education Act.

Federal law also provides a path for student borrowers who demonstrate they were defrauded by their colleges to receive relief through the Borrower Defense to Repayment provision. The House reconciliation bill would revert the borrower defense rule to a version put in place under the first Trump administration that made the process essentially impossible for defrauded borrowers to navigate. In 2019, TICAS documented the ways that rule protected the interests of fraudulent institutions rather than the students they defrauded. Among the burdens imposed by that rule: even if there is evidence that a group of students faced the same misrepresentations or fraud, they would each need to prove their case individually.

Recognizing the unreasonable barriers the rule created, bipartisan majorities in both the House and Senate rejected the 2019 rule, but President Trump vetoed that measure to keep the anti-student rule in place. Going back to this version of the rule will again put relief out of reach for defrauded borrowers.

Eliminating Unemployment and Economic Hardship Deferments

The Student Success and Taxpayer Savings Plan adds one more type of risk for student loans: it removes deferments of loans for borrowers who lose their job or find themselves in economic hardship. Currently, borrowers who lose their job or face economic hardship (defined as receiving a means-tested benefit or working full time but having an income below 150% of the federal poverty level) can receive up to three years of deferrals on their student loans. The bill would make it impossible to get relief for borrowers who suddenly find themselves facing hard times. As noted in our blog on income-driven repayment in the House Bill, this risk increases the likelihood that borrowers will find themselves entering the problematic world of default. And it is one more way the reconciliation proposal adds unnecessary riskiness to student debt.

Taking Action for Students and Borrowers

It’s no secret that federal higher education policy is out of date; Congress is more than a decade overdue to reauthorize the Higher Education Act. But to use the budget reconciliation process—driven by an interest in financing lower taxes for the richest among us, rather than an interest in advancing affordable access to education—as a blunt tool to knock down the potential of millions of Americans is simply a dereliction of duty. We are calling on Congress to reject this bill.

If enacted, the House education plan will be the latest case of the wealthiest and most powerful Americans eagerly walking through this country’s doors of opportunity only to slam those doors shut behind them.

Lydia Franz assisted with background research and editing for this blog.