Student Loan Reform Act
- Bill Number
- H.R. 8759
- Origin Chamber
- House
- Congress
- 119th Congress, Session 2
- Policy Area
- Education
- Status
- Introduced
- Latest Action
- 2026-05-12: Referred to the House Committee on Education and Workforce.
- Last Updated
- 2026-06-23T22:01:02Z
AI-Generated Summary
Purpose
The legislation establishes a voluntary program allowing colleges and universities to cosign federal student loans for their attendees. This aims to reduce risk for lenders through institutional involvement, which in turn supports lower interest rates for borrowers.
Key Provisions
- Institutional Cosigner Program: Starting July 1, 2026, the U.S. Department of Education must run a program where eligible colleges can choose to cosign all new federal direct student loans for their students in a given academic year.
- Participation Agreement: Colleges must agree to cosign loans and follow rules on liability if a borrower defaults.
- Loan Documentation Updates: The standard loan agreement form is revised to include cosigner details, a lower interest rate, and a signature field for the college.
- Cosigner Liability Rules: If a borrower defaults and 90 days pass without the loan being fixed, the college must repay the remaining balance over 10 years using a standard repayment schedule. The college's duty ends if the loan is fixed or fully paid. Borrowers remain in default status for credit reporting purposes, and any money recovered from them reduces the balance.
- Lower Interest Rates: Loans cosigned by participating colleges receive a reduced rate, set by the Department based on the lower risk.
- Public List: The Department publishes an annual list of participating colleges on its website.
- Default Rate Threshold Change: The threshold for serious consequences from high default rates rises to 40% for participating colleges (from the current 30%) and stays at 30% for non-participating ones. This change takes effect July 1, 2026.
Significant Changes to Existing Law
- Adds a new section (454A) to the Higher Education Act of 1965 creating the cosigner program and related rules.
- Modifies the cohort default rate rules in section 435(a) to provide a higher threshold for participating colleges.
- Requires updates to loan forms and repayment processes to account for institutional cosigners.
Potential Impacts
- On Government Agencies: The Department of Education would handle program administration, form revisions, rate calculations, and public reporting. This could shift some default recovery responsibilities.
- On Citizens (Students/Borrowers): Borrowers might access loans with lower interest rates, but schools could become more selective in admissions or loan approvals due to added financial risk.
- On Colleges: Institutions gain a tool to potentially improve loan terms for students but face new repayment obligations in default cases, which could affect their budgets and operations.
- On International Relations: No direct effects identified.
Main Stakeholders Affected
- Colleges and universities (as potential cosigners and participants).
- Student borrowers and their families (as loan recipients).
- The U.S. Department of Education (as program administrator).
- Taxpayers (through potential changes in default handling and federal loan costs).
Notable Legal, Constitutional, or Political Implications
- Legal: Introduces new liability rules for institutions in federal loan agreements, including specific repayment schedules and conditions for ending obligations. It also alters how defaults are measured and enforced.
- Constitutional: No explicit changes to constitutional provisions noted in the bill.
- Political: Represents a reform approach that increases institutional accountability in student lending while adjusting oversight thresholds, potentially encouraging broader participation in federal aid programs.
This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.
Sponsor
Recent Actions
- 2026-05-12: Referred to the House Committee on Education and Workforce.
- 2026-05-12: Introduced in House
- 2026-05-12: Introduced in House
Bill Versions
- Student Loan Reform Act — issued 2026-05-12 — PDF (7 pages)