Rep. Scott Perry (R-PA) recently introduced a bill that encourages colleges and universities to co-sign student loans with their student borrowers.
H.R. 3786, the Student Loan Reform Act aims to lower the cost of borrowing for students and encourage universities to keep the cost of higher education in check.
“My bill gives student borrowers choices and bridges a gap with universities,” Perry said. “We’re providing a natural market incentive, rather than a mandate or “forgiveness plan” to get the cost of college lower. We don’t want to limit opportunity for those looking to pursue a college degree, but the student loan crisis and default rates are threats to our National security. We need to re-inject some accountability into the system. Our proposal is a good first step to resolving the student loan crisis, and holding the taxpayer harmless in the process.”
Under the proposal, universities that choose to participate in the program could offer lower interest rates to their student borrowers. If a college or university makes the co-sign option available to its students, the student will get a lower interest rate proportionate to the reduced risk. The U.S. Department of Education would make available a list of colleges and universities that participate in the program.
Perry noted that, currently, if a student borrower defaults on a loan due to inability to pay, taxpayers are responsible for the cost of the student loan. Under the Student Loan Reform Act, colleges and universities would be responsible for the cost of the loan.
“Institutions of higher learning should stand by the degrees they offer,” Perry said. “If the cost of the degree isn’t going to yield the expected salary benefit, and a student, in turn, can’t cover his/her student loan payments, it’s in the best interest of the school to get the student on track, with better career services and/or a reduction of overall costs for the skills acquired.”
The bill is awaiting consideration by the House Committee on Education and Labor.