The House reconciliation bill outlines a new risk-sharing formula that would have colleges pay back a portion of their students’ unpaid student loan bills. The share of unpaid debt varies primarily based on program graduates’ earnings, relative to tuition paid, and on the program or institution graduation rate.
According to this report from the Urban Institute, the proposed accountability formula generates variable, nonlinear incentives for institutions and programs, principally on factors partially within their control: who graduates, what those graduates pay in tuition and fees, and whether they earn a sufficient wage after graduation. These incentives, which shift substantially based on the values of other formula components (especially on levels of borrowing and repayment under a new student loan repayment system) would likely create uncertainty and risk for institutions and programs considering whether to continue to offer student loans, the report says.