College Cost Reduction Act Could Now Save $250-$280 Billion
In January, the House Education and Workforce Committee reported out the College Cost Reduction Act (CCRA), which would make several changes to the student loan and Pell Grant programs for a savings of $185 billion according to the Congressional Budget Office (CBO). With the recent proposal of the “hardship” rule, we now estimate that the CCRA would reduce deficits by $250 to $280 billion over a decade.
In CBO's May 2024 score of the bill, the agency estimated $155 billion of direct savings from various changes to Pell Grants and student loans; most significantly, $127 billion of this savings would come from repealing and replacing the Biden Administration’s SAVE income-driven repayment plan with a less costly new plan. Another $30 billion of savings would come from restricting executive authority to make other changes to student loans, though this estimate is a placeholder for future possible administrative action.
With the Biden Administration's April 2024 student loan cancellation plan and subsequent hardship proposed rule, the pending rules add an additional $85 to $95 billion to baseline costs over the next decade. CBO’s convention is to add regulations that have not been finalized to its baseline estimates at 50 percent of the total cost, reflecting the uncertainty around the finalization of the rules, meaning the proposals would add between $170 to $190 billion to the baseline if both were finalized. CBO is limited by convention in how they can score such an open-ended proposal as the hardship rule, but we continue to believe that the true cost of the hardship rule could be much higher – up to $600 billion over ten years. The CCRA strips the Education Department’s ability to implement the hardship rule and the other pending rule. Overall, the total cost savings of the CCRA is now highly dependent on the fate of the two non-finalized rules as well as the SAVE plan, which is currently in litigation. If both cancellation and hardship were finalized, the CCRA’s total savings would increase to $335 to $375 billion; for now, with both rules pending, we estimate the savings would be scored at $250 to $280 billion.1
We will be further refining our estimates as they relate to higher education proposals in the baseline in the coming months.
1 Due to delays in implementation of new regulations, as well as possible minor interaction effects, we now estimate the rest of CCRA would decrease deficits by $165 to $185 billion.
