The “One Big, Beautiful Bill,” backed by President Donald Trump and awaiting passage in the Senate, would revolutionize how colleges distribute student loans, disincentivizing schools from saddling students with debt for degrees that don’t lead to employment.
The move would not just provoke left-wing colleges that have been a thorn in Republicans’ side, but also provide a practical, good-governance change that could save taxpayers billions and prevent people from being saddled with student loan payments they can’t afford.
Under the bill, colleges will have “skin in the game,” meaning if they churn out dropouts or graduates with a particular major who can’t afford to pay their student loans, the college will have to eat those costs. That makes it in their interest to discourage people from going into debt for programs in useless or low-quality fields, admitting students who are unlikely to be able to complete a useful program, or charging such high tuition that the increase in earnings isn’t worth it.
Colleges will no longer be able to admit an endless stream of people who take $150,000 in student loans for a gender studies degree when half of them default on their loans and stick taxpayers with the bill. Schools will have to reimburse the federal government for missed loan payments based on the percentage in a “program of study,” meaning a major within a particular school, who drop out or don’t see increased earnings based on the degree.
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A “value-added earnings” amount is calculated for graduates of each program based on their median salary four years after completing an undergraduate or doctoral degree, or two years after an associate’s or master’s degree. It looks at how much higher that salary is than 150% of the poverty level for those with undergraduate degrees, or 300% of the poverty level for people with graduate credentials. The number is further adjusted based on the cost-of-living in the metro area of the university, even though graduates may not be working in that region.
How much money schools have to repay is based on the relationship between total tuition cost and value-added earnings. Divide the median value-add by median cost of attendance. That’s the percentage of missed principal and interest payments that taxpayers will eat. Colleges must reimburse the government for the rest.
Let’s say a class of students spends four years earning degrees in critical race theory, with tuition of $50,000 a year, totaling of $200,000. Four years after that, at 26 years old, they are making a median of $30,000 in their jobs. The poverty level is $15,650, so college graduates should be expected to make more than 150% of that, or $23,475. That means the CRT program has value-added earnings of $6,525. Divide that by the cost of attendance, and you get 3%. When those graduates failed to make loan repayments, the colleges would have to eat 97% of the revenue that would otherwise be lost by taxpayers.
Left-wing colleges have also put taxpayers and impoverished young people at risk by lowering admissions standards — often in the name of diversity, equity, and inclusion — to the point where huge portions of those admitted aren’t capable of college-level work and wind up dropping out. Then, they default on their loans since they incur costs but do not earn a degree.
The Big Beautiful Bill would force colleges to own the results of their admissions decisions, with a separate reimbursement rate for missed student loan payments by people who dropped out of a given academic program. Colleges would have to reimburse the government for dropouts’ missed loan repayments based on the percentage of community college students who didn’t graduate in six years, and other students who didn’t complete the program within 150% of its expected time.
Let’s say a disreputable college is admitting people with abysmal math SAT scores, and using them as cash cows to pay reams of administrators and faculty who claim they’re making math majors out of them. All of the students are impoverished and pay tuition using student loans, and six years later, only half of them actually graduated. The other half defaulted on their student loans, missing a combined million dollars in payments per year. The school would have to reimburse the federal government for half of that amount, or $500,000.
The bill’s education provisions are aimed not just at mitigating taxpayers’ losses, but correcting the root cause: colleges should not admit people who are likely to drop out, and they should not encourage people to take on debt to major in things like art history. If they do offer majors that don’t lead to gainful employment, they can protect their bottom line by making sure tuition is low, making it easier to hit the required ratio.
The rates are calculated only based on people who take student loans, so if people really want to major in dance, knowing that most of them won’t make money, they can do so if they pay using private sources of funding. Colleges are also empowered to protect themselves the same way banks do when making an investment they know is risky, by limiting the amount of student loans people can use for particular majors.
The bill also stops students from taking out huge amounts of student loans. That comes after President Joe Biden waived billions of dollars in loan repayments, even though a court told him he didn’t have the authority. Democrats pushed the initiative by highlighting the sob stories of people who had hundreds of thousands of dollars in student loans, and whose lives have been ruined as a result.
Republicans say the best policy solution is making sure people never get in that situation to begin with. The bill caps lifetime federal student loans to $200,000, plus $50,000 in federal loans in a parent’s name. That will provide a strong disincentive for colleges to raise tuition, because they would lose out on many prospective customers if they do.
It also prevents the president from using executive orders or regulations that “would result in an increase in a subsidy cost.” Typically, when Democrats have tried to make college more affordable by subsidizing more of the cost, colleges simply raise tuition by that amount and pocket the proceeds.
“Colleges should have a stake in their students’ success and be responsible for reimbursing taxpayers for a portion of their losses if students don’t see financial value from enrolling in an institution and can’t repay,” Republicans on the House Committee on Education and Workforce said.
“Students, families, and the federal government pay tens, sometimes hundreds, of thousands of dollars in tuition while many degrees offer students no additional value but leave graduates with debt. Too many are left worse off than if they never enrolled in the first place.”
