What is the College Cost Reduction Act? These are the implications it could have on student loan payments

In early 2024, Representative Virginia Foxx introduced the College Cost Reduction Act (CCRA), a sweeping legislative proposal aimed at reshaping the financial landscape of higher education.

Although the bill didn't pass, it drew substantial attention for its broad proposals that touched nearly every aspect of student lending, federal aid, and institutional accountability. With the current political climate favoring education budget cuts, many of the bill's ideas are expected to return as the House Committee on Education and the Workforce aims for $330 billion in cuts over the next 10 years.

A bold attempt to reshape Student Loans and Federal Aid

The CCRA intended to overhaul the Higher Education Act of 1965, seeking to lower government spending on college programs and student loans.

While the act included some borrower-friendly provisions, like eliminating origination fees and stopping interest from capitalizing, it also featured more controversial measures that could shift the financial burden further onto students and families.

One of the most notable changes would have been the end of Graduate PLUS and Parent PLUS loan programs, which currently allow borrowers to take out uncapped amounts for higher education.

Instead, the CCRA proposed strict annual and lifetime borrowing caps.

Graduate students, for instance, would only be eligible to borrow amounts tied to the average cost of their degree program, while undergraduate loan limits would reflect either the national median cost of college or the Department of Education's maximum, whichever was lower.

Another major shake-up involved repayment.

The bill would have scrapped the current variety of federal repayment options in favor of just two: the standard 10-year plan and a single income-driven plan.

Under the new IDR plan, borrowers would pay based on a portion of their income above a certain threshold, but forgiveness wouldn't kick in until they repaid what they would have under the standard plan, potentially stretching repayment into a lifetime commitment.

Pell Grants also faced changes under the CCRA.

Rather than adjusting awards to a student's actual cost of attendance, grant amounts would be limited to the median cost of all colleges.

This shift could reduce aid for students attending more expensive schools or living in high-cost areas.

Additionally, the CCRA sought to hold schools financially accountable for student outcomes.

Institutions with low graduate earnings relative to debt could be required to reimburse the government, impacting funding especially for colleges serving large populations of low-income students.

While the College Cost Reduction Act ultimately didn't become law, it paints a clear picture of the types of reforms lawmakers may revisit in their efforts to curb education spending, some of which could lighten borrower costs, but many that might deepen long-term student debt.