Biden’s New College Plan: 5 Ways It Could Reduce Costs for Students
It’s not exactly breaking news that the cost of higher education has been skyrocketing in the United States, putting college out of reach for many students and burdening millions more with sometimes crippling student debt, among other debt, that takes decades to pay off. You’ve likely heard horror stories of people in their 40s and 50s — or even approaching retirement — who are still struggling with their student loan payments.
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While the Biden-Harris administration has yet to make good on a campaign promise by issuing universal student debt relief, more than 3.7 million borrowers have had nearly $140 billion of debt forgiven during the first three years of the Biden presidency.
Increased Transparency
One of the pillars of the Biden plan is to require institutions to make it clear to prospective borrowers what the true cost of college will be in the form of a personalized “shopping sheet” to every student who applies for federal financial aid. This sheet would outline the full cost of attendance, including tuition, fees and estimated living expenses, as well as any grants, scholarships and loans for which the student is eligible.
By providing this information upfront, the administration hopes to help students better understand their financial obligations and avoid taking on excessive debt.
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Eliminating Loan Origination Fees
According to the Office of Management and Budget, approximately 7 million undergraduate, graduate and parent borrowers pay origination fees of 1 to 4 percent of the total amount of their federal student loans as origination fees. The Biden administration said these fees “are a relic of an era when the government compensated private lenders to issue these loans.
Today, this fee is nothing more than a tax imposed on students by the government, costing consumers more than $1 billion annually.” The administration’s 2025 budget proposal would eliminate these fees if passed by Congress.
Cracking Down on Junk Fees
Another proposed rule would clarify that college banking products that give students access to their financial aid funds cannot include harmful fees, often called junk fees. A recent report by the Consumer Financial Protection Bureau found that banks are imposing millions of dollars in unusual fees on more than 650,000 student account holders with college bank accounts. And further found that students at Historically Black Colleges and Universities, for-profit colleges and Hispanic-serving institutions in particular are paying above-average fees.
No Automatic Charges for Textbooks
If you have attended higher education, you are probably keenly aware of the financial toll of college textbooks. Currently, many institutions automatically include textbooks in the billing for tuition.
The Biden administration’s proposed rule would mean that students could choose to approve any charges on their tuition bill for course materials. The reasoning is that by giving students the freedom to shop around would hopefully increase competition and drive down textbook prices.
Pocketing Unused Meal Plan Dollars
The last recently proposed rule would be one that requires institutions of higher education to return any leftover funds in meal plans to students who receive federal financial aid. Many institutions require students to purchase these meal plans — but if they contain unused funds at the end of a term, the institution can often keep these funds, essentially creating a financial penalty for students, as they are forced to either spend the remaining dollars on unneeded items or lose them entirely.
The Takeaway
For those who have already graduated, this part of the Biden plan won’t do much for you. The good news is that these rules, if adopted, should all be beneficial to prospective students of higher education. “For starters, the proposal’s emphasis on cracking down on what are deemed ‘junk fees’ could lead to more transparent pricing from educational institutions. This transparency is not just a win for fairness; it could also empower students and parents to make more informed decisions, aligning their educational investments with true value.
Take, for instance, the case of textbook fees, which have long been a thorn in the side of budget-conscious families. By addressing such fees, the initiative could reduce the overall cost of attendance,” said Dennis Shirshikov, adjunct professor of economics at CUNY and head of growth at Summer.
Lower costs are great news if you are hoping to attend college or pursue a graduate degree — but what it means for you will depend on the specifics of your financial situation. John F. Pace, certified public accountant and manager of Pace & Associates, stressed the importance of families engaging in comprehensive wealth management planning.
“This might include reassessing savings strategies, exploring tax-efficient ways to fund education and considering the timing of gifts or trust distributions,” Pace said. “Given the plan’s potential to alter the higher education financial landscape, proactive and flexible financial planning becomes more crucial than ever to mitigate unforeseen costs and maximize opportunities for financial aid or tax advantages.”
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This article originally appeared on GOBankingRates.com: Biden’s New College Plan: 5 Ways It Could Reduce Costs for Students
