S-4114-119
Read twice and referred to the Committee on Health, Education, Labor, and Pensions.
Sponsored by Jeanne Shaheen (D-NH)
What it does
This bill would make colleges and universities ineligible for federal student financial aid for three fiscal years if 15% or fewer of their students begin repaying loan principal by specified deadlines. It would also create a grant program — funded by "risk-sharing" payments from institutions with high nonrepayment loan balances — that awards money to schools where more than 25% of students are repaying loans and that have strong records of serving low- and moderate-income students. Grants could be used for need-based financial aid, academic support services, and accelerated learning programs. The bill would also require the National Center for Education Statistics to collect new data on student service spending, resources, and recruitment and marketing expenditures.
Who benefits
Low- and moderate-income students at high-performing institutions, who would receive additional need-based aid and support services funded by grants. Students broadly, who would gain new protections against enrolling at institutions with poor loan repayment outcomes. Taxpayers, who bear the cost of federal student loan defaults and would benefit from reduced nonrepayment. Community colleges and regional universities that already serve low-income students with strong outcomes. Researchers and policymakers, who would gain new data on institutional spending patterns. Employers, who may benefit from a better-prepared workforce.
Who is hurt
Institutions with low repayment rates — including some for-profit colleges, historically Black colleges and universities (HBCUs), and schools serving high proportions of low-income or first-generation students — that could lose federal aid eligibility. Current and prospective students at those institutions, who could lose access to federal financial aid even if the school's poor outcomes reflect student demographics rather than institutional quality. Institutions required to make risk-sharing payments, which may pass costs on to students through tuition increases. Schools with high marketing and recruitment expenditures that may face reputational or regulatory scrutiny from new data collection requirements.
Supporters argue
Supporters argue that the federal government spends over $100 billion annually on student aid with insufficient accountability for whether students can repay their loans, and that low repayment rates are a measurable signal of poor student outcomes. They contend that risk-sharing — requiring institutions to have financial skin in the game — creates incentives for schools to enroll students they can actually serve, and that redirecting funds to high-performing institutions serving low-income students targets resources where they produce the greatest return for both students and taxpayers.
Opponents argue
Opponents argue that loan repayment rates are heavily influenced by student demographics — income, race, and first-generation status — rather than institutional quality, meaning the bill could disproportionately penalize HBCUs and open-access institutions that serve the most economically vulnerable students. They contend that cutting federal aid eligibility at these schools would harm the very students the bill claims to protect, and that risk-sharing payment requirements could force tuition increases or program cuts at institutions already operating on thin margins.