As the saying goes, “Information is power and also your key to more knowledge”. So in this article, I will be showing you in detail what GOP’s PROSPER act is all about and also, how it affects you and your student loan forgiveness plan. Read on.
In this article, I will be pouring more light on the following points;
Many of the broad plans that President Trump proposed are in this bill, but there are also some big surprises. House GOP’S PROSPER Act completely repeals all forms of loan forgiveness for all new borrowers only starting July 1, 2019.
Promoting Real Opportunity, Success, and Prosperity through Education Reform (PROSPER) was passed out of House Committee on Education and the Workforce on Dec. 13, 2017, in the 115th Session of Congress. Not yet reintroduced in 116th Session.
The GOP’S PROSPER Act
PROSPER is a House Republican-backed reauthorization package for the Higher Education Act of 1965.
Groundbreaking legislation at the time, the original act had far-reaching implications for access, opportunity, civil rights, and regulatory oversight.
The PROSPER reauthorization would instead advance core conservative imperatives, including deregulation, privatization, and the elimination of myriad aid and forgiveness programs.
December 8, 2017 – In a letter sent to members of the House Committee on Education and the Workforce, NASFAA said that while it supports several provisions in the reauthorization bill, some “serious concerns and questions” remain regarding others.
PROSPER Act Bill’s Provisions
The PROSPER Act [H.R. 4508] is that overhaul. Among the bill’s provisions are:
- Instead of dozens of different federal student loan options, there would only be one type of loan and one type of grant.
- For undergraduates and graduates, lifetime student loans would be maximized at $60,250 and $150,000 respectively.
- However, these loans would be allowed to accrue interest while the student is still attending school.
- Public Service Loan Forgiveness program eliminated, under which one’s loans are significantly reduced if they work for the government or a nonprofit organization.
- Simplifies and streamlines the Free Application for Federal Student Aid (FASFA) forms.
- Gives an extra $300 Pell Grant for an increased academic workload.
The bill’s full name is the Promoting Real Opportunity, Success, and Prosperity through Education Reform Act.
Introduced by Rep. Virginia Foxx (R-NC5), Chair of the House Education and the Workforce Committee.
GOP’S PROSPER Act Effects on Student Loans
The committee’s aim with the new bill is to reform rather than simply reauthorize the Higher Education Act. Here’s a rundown of aspects of the PROSPER Act that could affect student loan borrowers.
One Loan, One Grant
PROSPER includes the one loan, one grant idea for streamlining federal student aid into a single funding tool.
Policymakers and others have circulated this idea for years as a way to simplify the loan process. The bill proposes eliminating Stafford and PLUS loans for first-time borrowers as of July 1, 2019, and replacing these options with a new Federal ONE Loan.
Borrowers who had borrowed direct loans prior to 2019 could still take them out until Oct. 1, 2024, at which point direct loans would be phased out entirely in favor of ONE Loans.
On the grant side, the bill eliminates or phases out all federal grant programs except for the Pell Grant. In exchange, the bill calls for an additional $300 Pell Grant for those who take 15 or more credits per semester.
New Borrowing Limits
The ONE Loan, despite its name, would have options for undergraduate and graduate students and parents and would have different borrowing limits for each type of borrower.
Dependent undergraduates could borrow up to $39,000 in federal student loans throughout their college career, while independent undergraduates would be able to borrow up to the $ 60,250-lifetime cap.
Graduate students would be limited to taking out $28,500 per year and $150,000 total, and parents could only borrow $12,500 per year and a total of $56,250 per child.
No Subsidized Loans or Origination Fees
Right now, students who demonstrate financial need are eligible for subsidized Stafford loans. Meaning the loan doesn’t accrue interest while the student is in school. That is in a grace period or during authorized deferment periods.
All students with or without financial need are eligible for unsubsidized Stafford loans, where interest starts accruing from the time the loan is disbursed.
Under PROSPER, all loans in the ONE program would be unsubsidized. Additionally, all loan aid would be disbursed weekly or monthly. This is done like a paycheck, rather than the current practice of one disbursement per semester. And all loan origination fees would be eliminated.
Only Two Repayment Options
ONE loan would come with only two repayment plans, down from the nine that exist today. The new plans would be a standard, 10-year loan repayment plan of 120 equal payments and a single income-based repayment program.
However, interest on ONE loan in income-based repayment plans would be capped at whatever the borrower would have repaid under the standard 10-year plan, and any interest that accumulates in excess of that amount would be canceled.
Direct loan borrowers would continue to be eligible for all the income-based repayment options that exist today, presumably through the life of their loans. Direct loans will still be available until 2024 for students who borrowed prior to 2019.
No PSLF for New Borrowers
PSLF remains one of readers’ most frequently asked-about topics. Clarifying PROSPER Act has in store for federal student loan borrowers who work in public service.
The bill does not address PSLF directly, but since it eliminates all repayment terms except the two previously mentioned, PSLF presumably goes away.
However, under the bill, ONE loans would not be eligible for PSLF but direct loans would be through the life of the loans.
From June 30, 2019, the only borrowers with existing loans would be allowed to take out direct loans through Oct. 1, 2024. Let’s say you started borrowing for college prior to 2019.
You could still receive a direct loan all the way through 2024, then enter public service, repay your loan for 10 years and still be eligible for forgiveness for the balance in 2034.
If, however, you begin borrowing for college in 2019 or later, you would only be eligible for ONE loans. And also ineligible for PSLF. The Senate Committee on Health, Education, Labor, and Pensions still has to weigh in, likely in early 2018. PROSPER is far from a done deal.
Also baked into the bill is a $150,000 cap on grad school borrowing. For programs like dentistry, medicine, veterinary medicine, and other health professional graduate programs, the cap is slightly higher at $235,500.
Many of you would not be able to pay for school at current tuition prices under this cap. The grad school program will be allowed to borrow as much as they need for the rest of their degree programs.
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