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The next Congress should look to reduce how much the government lends individually to college and graduate students, a key House Republican said Thursday, comparing the loan programs to policies that helped inflate the housing bubble and ended in a wave of foreclosures.

Rep. Virginia Foxx of North Carolina, the incoming chairwoman of the House Committee on Education and the Workforce, said the government has made it too easy for students and their parents to borrow too much, in turn driving up prices. She said she won’t seek to end federal student lending altogether. But she singled out so-called Plus loans, which go to graduate students and parents of undergraduates, as being problematic.

The PLUS programs impose no lending limits, allowing parents and grad students to borrow whatever is needed to cover tuition after a minimal credit check. Critics say the programs have empowered schools to raise tuition quickly and hurt some borrowers who have no hope of repaying. About one million borrowers owed $50 billion in debt from Grad PLUS as of June 30, Education Department figures show. Roughly three million borrowers owed almost $75 billion in Parent Plus loans.

Rep. Foxx said she expected her committee to consolidate those programs and other forms of student aid into three programs: a single grant program, a loan program and a work-study program that provides aid in exchange for part-time work. She didn’t say whether she supported ending loans to parents or setting a hard limit how much grad students could borrow, but she said both options would likely be considered.

“There is a lot of concern about the amount of debt many students get through the Plus loans and in other ways,” said Rep. Foxx, a former university administrator.

“Why did we have a housing bubble? Why did we have a crash in 2008? Most people would say it was because…we pushed the banks to give loans to people they couldn’t give back,“ she said. ”When you do that with student loans it’s the same sort of thing.”

Economists have long debated the effect that federal aid has on tuition. Recent research has linked increases in student aid with higher prices.

Rep. Foxx’s comments set the stage for a debate next year over the government’s $1.26 trillion student-loan portfolio, which grew rapidly over the past decade amid a historic boom in higher-education enrollment.

President-elect Donald Trump said on the campaign trail he wanted to help Americans with student debt, and he endorsed the idea of capping monthly payments as a share of borrowers’ earnings and forgiving some student debt. But he has also suggested shifting lending responsibilities from the government to private banks.

But Rep. Foxx, who has called herself a Tea Party advocate who believes strongly in limited government, dismissed the prospect that congressional Republicans would seek to eliminate or even radically downsize the Department of Education. She suggested Congress would likely settle for a more incremental approach to downsizing the agency’s role amid what is expected to be strong resistance from Democrats to rein in the government’s federal role in education.

“What I have always said is here’s my ideal: No federal Department of Education. But I know we’re not going to meet my ideal,” she said, adding: “You’re not going to see me imposing my will on the committee.”

Ben Miller of the Center for American Progress, a left-leaning think tank, said the focus should be the quality of the schools that students attend.

“If we’re really worried about loan performance we should first talk more about what schools we allow to lend, not student terms,” Mr. Miller said. “There’s not enough accountability for how schools perform with their loans and more needs to be done there.”

One factor that will likely complicate the coming debate is the disparate outcomes among borrowers. Many borrowers earned degrees, work in decent-paying jobs and are paying off their debt. But others dropped out and now aren’t making payments. Some eight million people are in default on federal student loans, federal Education Department data show, and millions of others are opting for income-driven repayment plans.

Most people in default owe less than $10,000 and didn’t borrow from the PLUS programs. But there is a growing minority of borrowers who did borrow heavily and are now struggling to pay the balances back.

Rep. Foxx said one concern is debt-forgiveness programs are, in an unintended way, on track to forgive balances of borrowers in well-paid fields.

She said she also wants to study ways to help students to avoid dropping out, since such students are much more likely to default on their loans than those who finish.

She said she wants to scrutinize the costs of forgiveness programs, called “income-driven repayment” because they set the monthly payment as a share of a borrower’s earnings.

The Government Accountability Office reported that, for loans issued through the current fiscal year, the programs are projected to forgive at least $108 billion in student debt in coming years.

“I want to know that it’s being spent well and we’re getting good results from it,” Rep. Foxx said. “I’m extremely sensitive about this.”

http://www.wsj.com/articles/congress-will-likely-consider-reining-in-student-loan-programs-house-republican-says-1481833008