Douglas Belkin,
Josh Mitchell and
Melissa Korn:

The Republican-controlled U.S. House of Representatives this week will propose sweeping legislation that aims to change where Americans go to college, how they pay for it, what they study and how their success — or failure — affects the institutions they attend.

The most dramatic element of the plan is a radical revamp of the $1.34 trillion federal student-loan program. It would put caps on borrowing by parents and students and eliminate some loan-forgiveness programs for students. …

As part of its plan to slow the growth of federal student loans, graduate students and parents of undergraduates would face so-far-unspecified caps on how much they could borrow for tuition and living expenses—instead of borrowing whatever schools charge. The change could cut into enrollment and potentially siphon off billions of dollars a year from universities.

The bill would also end loan-forgiveness programs for public-service employees, who currently can make 10 years of payments and then have their remaining debt forgiven, tax-free.

It would preserve an option known as “income-driven repayment,” which ties borrowers’ monthly bills to their earnings, but would eliminate the ability of borrowers to have balances forgiven under them. Currently, borrowers can make payments of 10% or 15% of their discretionary incomes—as determined by a formula—and have remaining balances forgiven after 20 or 25 years. Under the bill, borrowers would pay 15% of discretionary incomes for as long as it took to cover the amount they would have paid under a 10-year standard repayment plan. Current participants in both programs would be grandfathered in.