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We must protect our most vulnerable students from debt 


America’s system of higher education as we know it may soon get an overhaul. Or at least that’s what House Republicans are aiming for. The so-called PROSPER Act is expected to be voted on as early as next week, but it does more harm than good to needy students and our higher education system.

Most importantly, the PROSPER Act would make our nation’s student loan system worse.

{mosads}The bill aims to simplify the current structure, streamlining multiple income-based repayment options into one. This is good, our current system is too complex! Unfortunately the design of the new repayment plan winds up hurting those who need help the most, low-income students. According to multiple analyses, the new system would cost low-income borrowers thousands of dollars more. This is made worse with the elimination of Public Service Loan Forgiveness, a program that forgives student loan balances after ten years for students who work in fields deemed to be of public importance, like teachers and the police.

In order to fix these problems, it is important to understand why House Republicans proposed these changes in the first place. For many, the value of a college degree is far greater than the price of college, and is very likely to pay for itself many times over. College degrees open doors to higher paying careers that would otherwise be out of reach. But under our current system even some relatively high-earning borrowers (for whom college clearly paid off) end up receiving a large subsidy in the form of loan forgiveness. It’s only fair that those who succeeded thanks to their education should pay their fair share, and so the PROSPER Act makes nearly everyone pay more.

But even if college is a worthwhile investment for the vast majority of students, it doesn’t work out for everyone.

There is still risk involved even if college is a bet worth taking on average. For some, high paying jobs never materialize and student debt takes over their lives. The risk is highest for borrowers who never graduate, but still accumulate student loan debt that they can’t discharge in bankruptcy. So while the new repayment formula may be more “fair” to the average college graduate, it makes life considerably more difficult for the borrowers who are already struggling.

Fortunately, protecting low-income borrowers and receiving a fair share from those who get a big payoff from attending college is not an either/or situation. We can help borrowers who need to repay debts and keep the program financially solid by tweaking our current formulas. The simplest way would be to raise the required income below which borrowers don’t have to make payments, currently 150 percent of the Federal Poverty Line. A better and more efficient option would be to borrow from our system of taxation and base the percentage of income that borrowers repay on how much they make.

Indeed, a truly well-designed repayment system based on income is a compromise both sides could count as a win.

This system would be both more efficient, those who receive the benefits of college would pay their fair share, and better targeted, we wouldn’t be charging our already underpaid teachers an arm and a leg each month. It is far superior to the clunky loan forgiveness system we currently use — a trade both Democrats and Republicans should be willing to make.

Of course, the PROSPER Act does much more than change the student loan repayment system. It implements a degree of deregulation that would hurt both borrowers and taxpayers. And its proposed accountability system does not do nearly enough to actually hold institutions accountable or meaningfully improve transparency on student outcomes.

It has been a decade since the last time Congress made a significant foray into the higher education landscape. Now is the time to get things right, not push a deeply flawed bill through Congress. Fortunately, the Senate committee which will handle any higher education bill is arguably the best functioning and most bipartisan in all of Congress. Let’s make sure House Republicans give them something they can work with to help students from all walks of life.

Douglas Webber is an Associate Professor in the Department of Economics at Temple University.  His research areas are labor economics and the economics of higher education.


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