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Officials outlined a proposal to require colleges that accept taxpayer funds to “have skin in the game through a loan risk-sharing program,” in the president’s proposed fiscal 2020 budget outline – released on Monday.
Students are required to pay back their loans regardless of the “quality” of education received, which may directly affect their ability to fulfill obligations as a borrower. Unfulfilled obligations bear no consequence on the college.
“A better system would require postsecondary institutions accepting taxpayer funds to share a portion of the financial responsibility associated with student loans,” the document read, adding the administration planned to work with Congress on the issue.
In response to the proposal, House Budget Committee Chair Rep. John Yarmouth's office said that Democrats support reducing student loan debt, but Trump's budget "included no policy details."
Outstanding student loan debt surpassed $1.5 trillion in 2018, doubling over the past decade.
The government is responsible for backing up what students cannot repay – meaning the onus ultimately falls on taxpayers. The current administration’s proposal indicates it is looking to shift some of that burden, and risk, back onto the schools.
The White House is considering issuing an executive order regarding higher education, which could include risk-sharing for student loans, sources told FOX Business.
During a speech made earlier this month at the Conservative Political Action Conference (CPAC), Trump referenced a possible order, suggesting it could pertain to institutions that restrict free speech.
“If they want our dollars, and we give it to them by the billions, they’ve got to allow people … to speak,” Trump said. “Free speech. And if they don’t, it will be very costly.”
A separate part of the budget highlighted an idea for future loans that would cap a borrower’s monthly payment at 12.5 percent of discretionary income – forgiving any balance remaining after 15 years (180 months). For graduate debt, it would be forgiven after 30 years of repayment.
FOX Business’ Blake Burman contributed to this report.