Republican Education Reform Bill: Reshaping Higher Education's Future

Forbes

05-05-2025

Loan or savings for college. Graduation cap and roll of dollars.
A seismic shift in federal higher education policy is on the horizon. The Republican-led House Education Committee has unveiled what many analysts call the most sweeping changes to student financial aid in decades. This ambitious overhaul introduces significant reforms affecting everything from loan caps to institutional accountability, with profound implications for students, families, colleges, and taxpayers.
The bill's architects frame these reforms as necessary corrections to a broken system that has fueled both skyrocketing tuition costs and unsustainable student debt. Critics counter that many proposals threaten to pull the educational ladder up behind those who have already climbed it.
Several key provisions that would dramatically restructure how Americans pay for college are at the heart of the legislation. Let's examine each major component and what it would mean for different stakeholders across the educational landscape.
Perhaps the most consequential change would cap annual federal financial aid at the previous year's national median cost of attendance for specific programs. Preston Cooper, notes in Forbes that 'Study after study has shown that colleges exploit these unlimited loans to hike tuition,' suggesting this measure could finally create downward pressure on tuition.
The bill would also establish lifetime borrowing limits: 50,000 for undergraduates, $100,000 for graduate programs, and $150,000 for professional degrees such as medicine and law.
The House Education and the Workforce Committee states that these caps would curb excessive debt burdens. However, the American Council on Education has pushed back firmly, arguing that "limiting the availability of federal aid to the median cost of specific programs" is among several "harmful proposals" that would "reduce student aid to low-income students and would impose onerous financial penalties on institutions, particularly those least able to meet them." The organization warns this approach fails to account for regional cost variations and could disproportionately impact institutions in high-cost areas.
The legislation targets several established loan programs. Grad PLUS loans and unsubsidized loans for undergraduates would be eliminated entirely. Parent PLUS loans would remain but with a new $50,000 aggregate limit. Federal student loans for part-time students would be prorated based on credit hours.
These changes would substantially simplify the federal loan system and reduce government spending. The House Education Committee argues these reforms would streamline "complicated, confusing student loan programs." But simplification comes at a cost.
Higher education experts have warned that "the death of Grad PLUS alone might threaten to close some colleges," according to reports from Inside Higher Ed. Graduate students would face significantly reduced borrowing options, while undergraduates would lose necessary interest subsidies during their studies. While the bill assumes market forces will drive down costs, but in the short term, it will almost certainly reduce access for those with limited family resources.
The legislation would dramatically simplify repayment options, reducing them to just two plans: one with fixed monthly payments over 10-25 years and another setting payments between 1-10% of borrowers' income.
While simplification could reduce confusion for borrowers navigating the current maze of repayment options, the National Association of Student Financial Aid Administrators (NASFAA) has expressed concern that the proposed income-driven repayment plans would be less generous than current options. The American Council on Education warns these changes would establish less favorable loan repayment options, leading to students paying more, borrowing more, and facing costlier repayment terms.
The Pell Grant program, the cornerstone of need-based federal aid, would undergo significant changes. Students would need to work at least 15 semester hours per year to qualify, a requirement that could exclude many part-time students who are juggling work, family, or other obligations.
On the positive side, eligibility would expand to students in "short-term, high-quality, workforce-aligned programs," potentially helping non-traditional students quickly gain marketable skills. The bill also allocates $10.5 billion to address the current Pell shortfall, ensuring the program's near-term stability.
Perhaps the most controversial element of the legislation is its approach to institutional accountability. Schools would be required to reimburse the government for a percentage of unpaid student loans disbursed after 2027, with the percentage based on price, graduates' earnings, and completion rates.
Rep. Suzanne Bonamici (D-OR) called the proposal "shortsighted," arguing it creates this perverse incentive for schools to shut down programs that prepare students for in-demand but underpaid careers like teaching or social work or public service fields and would create an incentive for schools to enroll wealthier students who are more likely to repay their loans at higher rates.
The American Council on Education's analysis found that 98 percent of institutions would have a risk-sharing payment" and 75 percent of institutions would have an overall net loss, which would penalize institutions serving the largest numbers of those students who struggle most in the labor market: low income, first generation, and underrepresented student populations."
The legislation would eliminate several Obama and Biden-era regulations, including the 90/10 rule requiring for-profit colleges to obtain at least 10% of revenue from non-federal sources and the gainful employment rule holding programs accountable for graduates' debt-to-income ratios.
The bill would repeal the Biden administration's version of the borrower defense to repayment regulations, which makes it easier for students defrauded by their colleges to get debt relief.
The Senate Republican proposal, while sharing many elements with the House version, takes a more moderate approach in several areas. According to Forbes, the Senate version maintains subsidized loan availability for undergraduates and offers different repayment structures.
As this legislation moves through Congress, fundamental questions emerge about its impact on American higher education. While specific proposals address legitimate concerns about college affordability and student debt, others threaten to reduce access for disadvantaged students and create new challenges for institutions serving vulnerable populations.
In a letter to Rep. Wahlberg, chair of the Education and Workforce Committee, Ted Mitchell, President of the American Council on Education, wrote on behalf of 6 other educational associations, that 'The overwhelming majority of provisions in the bill would reduce student aid to low-income students and would impose onerous financial penalties on institutions, particularly those least able to meet them.' Whether this, or Preston Cooper's view that 'If passed, the result of this policy mix will be a saner and more sustainable student loan system,' will be borne out as the final bill is enacted and the changes take place.
As the debate unfolds, one certainty emerges: American higher education is on the cusp of its most significant policy transformation in decades. Whether that transformation expands opportunity or contracts it will shape economic mobility, workforce development, and social equity for years to come.