Student Loan Reform Act

Key Points

• This bill creates a voluntary program where colleges can choose to cosign all federal student loans for their enrolled students in a given academic year. If a school opts in, it must cosign every new eligible loan that year, not just some.
• Students at participating schools would get lower interest rates on their federal loans. The reduced rate reflects the lower risk to the government when a college is also on the hook for repayment.
• If a borrower defaults and stays in default for 90 days without rehabilitating the loan, the college must start making payments under a standard 10-year repayment plan. However, the student's credit is still damaged since they remain considered in default.
• Participating schools get more flexibility with federal default rate rules. The threshold at which a school can lose federal funding rises from 30% to 40% for schools in the cosigner program, giving them more room before facing penalties.
• The Department of Education must publish a public list of participating schools each year, giving students and families a new way to compare which institutions are willing to stand behind their graduates' ability to repay loans.