The Higher Education Act (HEA) governs federal student aid programs (among other facets of higher education). Congress revises it periodically to address the ever-changing higher education landscape, and the latest update is now 4 years overdue.

We finally saw some movement on this in late November 2017, as Republicans introduced the Promoting Real Opportunity, Success and Prosperity Through Education (PROSPER) Act. This legislation would not just reauthorize the HEA—it would really shake things up.

This bill has a lot of moving parts (and my editor tries to keep me from writing a tome for each post). Therefore, I’m going to focus today on the biggest change in the PROSPER Act and what it means to student loan borrowers—now and in the future.

Introducing The ONE Loan

The PROSPER Act will eliminate Direct loans and replace them with ONE loans. While both are federal loans from the government, they have some key differences.

First, the ONE loan lets you borrow more money each year and overall than the Direct Loan program—except if you’re a parent. Parents would be limited to $12,500 per student per year (down from borrowing up to a school’s cost of attendance minus all other aid), with an aggregate limit of $56,250 per student.

Unfortunately, all of these loans will be unsubsidized—meaning you’ll pay all the interest on it. Under the Direct Loan program, the government pays the interest that accrues on subsidized loans while students are enrolled at least half time. Without that assistance, students will repay even more on their loans.

What About PSLF?

The proposed transition to the ONE loan would take effect on July 1, 2019, for all new borrowers. If you’re a current Direct loan borrower, you could continue to borrow Direct Loans until September 30, 2024.

That’s important because while the PROSPER Act does not specifically call out Public Service Loan Forgiveness (PSLF), it would eliminate this program in the future—but not necessarily for current borrowers, who have been worried about this scenario.

PSLF is only available for the Direct Loan program. Since no new borrowers could get Direct loans as of July 1, 2019, this option won’t be available to students who start their educations after that point and wish to enter potentially low-paying public interest careers.

What Happens Next?

The PROSPER Act will make a lot of headlines, not only for the elimination of the Direct Loan program but also for the changes it introduces to Pell grants, Federal Work-Study, the FAFSA, and many other aspects of federal student aid.

But it’s important to remember that this bill is just an initial proposal. If it passes, some parts will change from what we can read today. If you’re unhappy with parts of the PROSPER Act, I urge you to contact your representative and express your feelings.

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