Sponsor
Scott Perry
Representative · R-PA
Representative · R-PA
The bill makes loans cheaper and expands access for some students via institutional cosigning and adjusted default‑rate rules, but it shifts substantial repayment and financial risk onto colleges (and potentially taxpayers), creates incentives that could raise costs or restrict access, and adds regulatory complexity.
Students at participating institutions can borrow Federal Direct loans at a lower interest rate, reducing out‑of‑pocket borrowing costs for enrolled students.
Students who lack a private cosigner gain improved access to credit because their institution may cosign loans, making enrollment more affordable for some.
Families and applicants can more easily identify schools offering the institutional cosigner benefit due to required public disclosure, increasing transparency for decision‑making.
Colleges and universities that cosign become legally responsible for full repayment after 90 days of borrower default, exposing institutions to potentially large financial liabilities.
Borrowers remain reported as in default while the institution pays on their behalf, which can harm students' credit reports and access to future credit despite institutional intervention.
To offset cosigner liabilities, institutions may raise tuition, fees, or cut/limit programs and services, which could increase costs and reduce options for students and families.
Based on analysis of 3 sections of legislative text.
Creates a voluntary program allowing colleges to cosign Federal Direct loans (starting 7/1/2026), shifting default liability to participating institutions and changing cohort default rate thresholds.
Official title: To amend the Higher Education Act of 1965 to direct the Secretary of Education to carry out a program under which an institution of higher education may elect to cosign Federal student loans made to students attending the institution, and for other purposes.
Introduced May 12, 2026 by Scott Perry · Last progress May 12, 2026
Creates a new voluntary federal "institutional cosigner" program that lets colleges and universities agree to cosign all new Federal Direct loans for students enrolled in a given academic year beginning July 1, 2026. Participating institutions accept legal repayment responsibility if loans default and remain unrehabilitated for 90 days, will be placed on a 10-year repayment schedule for that liability, and borrowers get a reduced interest rate set by the Secretary of Education; cohort default rate thresholds are adjusted based on participation.