Colleges May Soon Pay For Students’ Defaulted Loans

Senator Josh Hawley introduced the Make The Universities Pay Act, a bill that looks to require colleges to pay off half of students' defaulted loans while holding them to greater accountability.

By Erika Hanson | Published

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More Americans than ever before are calling for colleges and universities to be held to greater accountability for their part in the student debt crisis. To many’s delights, lawmakers are looking to make that notion a reality as well. Now, a new proposal may soon require these institutions of higher education to pay for half of the costs of defaulted student loans. 

John Hawley, a Republican Senator from Missouri introduced the Make The Universities Pay Act on Wednesday, September 21st. Other than requiring any college to dish out half of the balances from defaulted loans, it also contained clauses prohibiting schools from increasing tuition to offset this expense. In other terms, they would have to prove the increase in costs was due to something else, such as declining administrative expenses. 

Another major portion of the bill would change bankruptcy approval for student loans. Typically, Americans can claim bankruptcy when they are unable to pay off debt such as credit cards. But with college loans, a person may never file for bankruptcy. 

This has long been partially to blame for the tremendous amount of student loan debt held across the nation, which totals a whopping $1.75 trillion. This college debt has always been ineligible for bankruptcy. This means that it remains owed by a borrower no matter what until they pay it off. 

Make the Universities Pay laid out proposed terms for how to do this. In the new proposal, undergraduate student loan debt would be eligible for discharge five years after the first payment becomes due. Graduate college students would qualify after fifteen years. 

Furthermore, the piece of legislation asked for colleges to publicly post information that clearly depicts realistic outcomes for future graduates. This includes mean and median earnings for each graduate program. Likewise, it would require them to post student loan default rates, separated by each degree program. 

The bill’s establishment comes at a time of great debate over student loan debt. Just a month ago, President Biden announced an unprecedented plan for sweeping student loan forgiveness. The act allows federal college loan borrowers to have $10,000 wiped from their balances and $20,000 from pell grant recipients. 

As some applaud the decision, many argue that it does nothing to alleviate the real issues with higher education. The act may alleviate the burden for millions of Americans who are struggling to make college payments. However, it doesn’t address the colleges and universities that have been allowed to monopolize the industry and perpetually increase the price to attain a degree.

Senator Hawley is hopeful that this new bill will further address the worries of Americans fearing that colleges and universities require more accountability. In a news release from the Senator’s office, Hawley berated colleges for “charging extortionary tuition.” If passed, he hopes the legislation would keep students better informed before they take on debt, and also make the schools pay their fair share if they choose to lure young students into loans they may not be able to afford. 


Still in the early stages, it is unclear today whether or not the bill has the power to make it through Congress. But with a growing call from not only the public but also politicians to address the heart of the issues with America’s college debt, it has a chance. Millions of Americans end up taking on student loan debt they can not afford, and this new proposal looks to alleviate issues with that.