Higher Education Reform and Opportunity Act
Sponsored By: Senator Mike Lee
Introduced
Summary
Single Federal Direct simplification loan and phase out most loan forgiveness. The bill would consolidate federal student loans into one simplified Direct loan program with new interest caps and borrowing limits, and would generally end loan forgiveness for loans made on or after July 1, 2025.
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- Borrowers: Would create Federal Direct simplification loans under a new Section 460A with interest caps such as 8.25% for undergraduate loans and a 15-year repayment term for undergraduate borrowers. Income-contingent repayment and using these new loans in forgiveness programs would be prohibited.
- States and accreditation: Would let states establish alternative accreditation systems that, if approved by the Secretary, make programs eligible for federal aid. Approved state plans would operate for five years and must report on student outcomes and transfers every three years.
- Institutions, reporting, and penalties: Would require colleges to publish program-level data on enrollment, debt, completion, employment, and earnings while protecting student privacy and forbidding federal use of that data against individuals. It would add an annual institutional default-rate fine, include a $400 credit per Pell Grant recipient, and create criminal penalties up to five years in prison for wrongful disclosure or misuse.
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Bill Overview
Analyzed Economic Effects
4 provisions identified: 1 benefits, 1 costs, 2 mixed.
New simplified federal student loans
If enacted, the bill would create a new Federal Direct simplification loan starting July 1, 2025. Interest for undergraduates would be the 10-year Treasury high yield plus 2.05 points, capped at 8.25%. Graduate rates would be Treasury high yield plus 3.6 points, capped at 9.5%. Interest would start when each loan is disbursed. Annual and aggregate caps would apply (dependent undergrads $7,500/year and $30,000 total; independent undergrads $15,000/year and $60,000 total; grads $18,500/year and $74,000 total). Repayment would be fixed (15 years for undergrads, 25 years for grads) and would begin after 125% of normal program time or six months after withdrawal. No origination fee would be charged and prepayment would be allowed. The bill would bar income‑contingent repayment and would generally bar loan cancellation or forgiveness for loans made on or after July 1, 2025. It would also stop most old Part D loans to new borrowers after June 30, 2025 and phase out non‑460A lending by September 30, 2028. Eligible schools could require financial counseling at or before disbursement and could award less than the maximum federal aid when institutional charges are lower.
More school data on costs and outcomes
If enacted, every Title IV school would have to publish annual program and school data on its website. Required items include counts and percentages of students receiving federal, state, and institutional aid; enrollment and completion rates; time to degree; employment rates at 2, 4, and 6 years by program; median earnings at 5, 10, and 15 years; average federal loan debt at graduation and for students who leave without a degree; and default and non‑repayment rates disaggregated by student status. Schools must protect student privacy and comply with FERPA when publishing data.
Schools face fines for loan nonpayment
If enacted, each Title IV school would pay an annual fine equal to (15% minus the U.S. average unemployment rate) times its outstanding loans that are not being paid on time. Each school would get a $400 credit for each graduate who received a Federal Pell Grant during that fiscal year. The fine could not be less than zero.
States may run accreditation systems
If enacted, a State could run its own accreditation system for Title IV eligibility if it files a plan that meets the law's rules. The Secretary must publicly respond within 30 days and may approve a plan for five years. Schools accredited under an approved State plan could be exempt from some federal accreditation requirements. States must report every three years on enrollment, completion, and any third‑party verification.
Sponsors & CoSponsors
Sponsor
Mike Lee
UT • R
Cosponsors
There are no cosponsors for this bill.
Roll Call Votes
No roll call votes available for this bill.
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