WASHINGTON – Seeking to cut higher education costs for middle-class families and make college more affordable for American students, U.S. Senators Chris Murphy (D-Conn.), Jack Reed (D-R.I.), Richard Durbin (D-Ill.), and Elizabeth Warren (D-Mass.) are leading the charge to help reduce student loan debt and protect students from the crippling burdens of student loans.  The senators are introducing the Protect Student Borrowers Act to make institutions of higher education more accountable for student indebtedness by requiring them to assume some of the financial risk of student loan default based on the percentage of their graduates and former students who default on their loans. The legislation will also provide incentives and support for institutions to assist their students to effectively manage their debt and reduce defaults. 

“Too many colleges are handing out degrees that aren’t worth the money students put into them, saddling students with debt they’ll never be able to get out from under,” said Senator Murphy. “Colleges and universities should have some skin in the game to make sure they aren't cheating students. The Protect Student Borrowers Act will encourage colleges and universities to create new and innovative programs to reduce student loan burdens, and hold them accountable when they don’t.”

“College is critical for preparing students for the future, but too many leave school with a staggering level of student loan debt to repay,” said Senator Reed. “That debt is a burden that will affect their economic choices for years to come, including what career they’ll pursue, when and if they’ll buy a home, and whether they can afford to start thinking about a family.  We have to take significant steps to address this student debt crisis that is threatening our economy.  We need to tackle student loan debt and college affordability from multiple angles, and all stakeholders in the system should be required to do their part.  We simply can’t take on the student loan debt crisis without institutions also stepping up and taking greater responsibility for college costs and student borrowing. With the Protect Student Borrowers Act, we are providing the incentives and resources for institutions to take more responsibility to address college affordability and student loan debt and improve student outcomes.  I urge my colleagues to cosponsor this bill and look forward to working with them to ease student debt and boost our economy.” 

“Too many colleges and universities – many of them for-profits – load their students with huge amounts of debt while failing to prepare them to be successful after graduation. When these students can’t pay back their loans, their credit is destroyed and taxpayers lose their investment.  It’s time for these schools to have some skin in the game too,” said Senator Durbin.  “This bill will help hold schools financially accountable when high numbers of their graduates default on their loans while rewarding those schools that keep their default rates low.”

“Right now, if a college fails to deliver on the promise of a quality education, students and taxpayers still pay the price,” said Senator Warren.  “That's a broken system. We need to make sure that colleges help students build a successful future without being crushed by debt. The Protect Student Borrowers Act takes a step to make that happen by ensuring that colleges and universities have skin in the game when it comes to students’ success after graduation."

Across the nation, student loan borrowers have struggled to repay their debts, with millions of Americans burdened by the need to repay student loans and total amounts owed totaling over $1.3 trillion.  According to an analysis of student loan debt by the Federal Reserve Bank of New York, between 2004 and 2014, there was an 89 percent increase in the number of student loan borrowers and a 77 percent increase in the average balance size. Today, over 40 million Americans have student loan debt. Growing debt levels in recent years have put a drag on the nation’s economy. As student loan debt has grown, young adults have put off buying homes or cars, starting a family, saving for retirement, or launching new businesses.  

With the stakes for students and taxpayers at such a high level, the Protect Student Borrowers Act would alleviate some of the pressure on borrowers by requiring institutions of higher learning to bear some of the risks in the student loan program.  Notably, the bill would hold colleges and universities accountable for student loan defaults by requiring them to repay a percentage of defaulted loans.  Only institutions that have one-third or more of their students borrow would be included in the bill’s risk-sharing requirements based on their cohort default rate, and risk-sharing requirements would kick in when the default rate exceeds 15 percent.  The institution’s risk-share payment would rise in accordance with its default rate.  The risk-sharing payments would be invested in helping struggling borrowers, preventing future default and delinquency, and increasing Pell Grants at institutions with low default rates that enroll a high percentage of Pell Grant recipients.   

The Protect Student Borrowers Act also provides incentives for institutions to take additional, proactive steps to ease student loan debt burdens and reduce default rates, such as implementing comprehensive student loan management plans.  The Secretary of Education may also waive or reduce the payments for institutions whose mission is to serve low-income and minority students, such as community colleges, historically Black institutions, or Hispanic-serving institutions, provided that they are making progress in their student loan management plans.