Bill Introduced to Allow Colleges to Cosign Student Loans
Representative Scott Perry has introduced legislation that would allow universities and colleges to cosign federal student loans made to students attending the institution.
The Student Loan Reform Act seeks to amend the Higher Education Act of 1965 by including Institutional Cosigner Program to encourage schools to co-sign student loans with their student borrowers and keep the cost of attending college in check.
In simple terms, if the student defaults on student loans, the cosigning school will be liable to pay back the amount instead of putting a burden on taxpayers.
It would require an authorized representative of an institution participating in the program to cosign all eligible direct loans made to students enrolled at the institution for such academic year on behalf of the institution
“My bill gives student borrowers choices and bridges a gap with universities. We’re providing a natural market incentive, rather than a mandate or “forgiveness plan” to get the cost of college lower,” said Perry.
Currently pending with the House Committee on Education and Labor, the bill would ensure lower interest rate for student borrowers as a result of the reduced risk after the school starts the co-sign option. It encourages the co-signing without providing a taxpayer-paid bailout for student loans.
“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,” he added.
In recent months, several lawmakers have been pushing for partial or full forgiveness of student loans held by nearly 45 million Americans. Last week, Senator Elizabeth Warren introduced bicameral Student Loan Debt Relief Act to forgive loans of up to $50,000 for those whose household gross income is less than $100,000 by using already available data on household gross income and pending student loan debt.