Risk-Sharing for Higher Education: The House Republican Proposal’s Impact on Institutions and Students

As students have borrowed more for college over the years, an idea has gained traction across the political spectrum: That colleges should be accountable for whether their students can repay loans and boost their earnings once they graduate. That idea gave rise to “risk-sharing” proposals in Congress, a policy that would require institutions to have some “skin in the game” when it comes to the federal student aid dollars they receive. The premise is simple: if colleges benefit from enrolling students who take on federal loans, those institutions should share in the consequences when those students struggle to repay them.

The political right has been particularly interested in risk-sharing. Most recently, House Republicans included a risk-sharing proposal that has made its way into their One Big Beautiful Bill Act, sweeping proposed legislation that would enact billions of dollars in cuts to education, healthcare, and food assistance to pay for tax breaks for the wealthy.

Not all risk-sharing proposals are created equal—and the House Republicans’ latest attempt proves that point. Their proposal claims to hold colleges accountable, but once you dig into the details, you’ll find a plan that creates the illusion of reform through an overly complicated and nearly impossible-to-implement framework that fails to deliver on the bill sponsors’ goals and lacks the real protections that students and taxpayers need.

The specifics of this proposal highlight serious concerns for Congress to weigh as they seek to remake American higher education through the reconciliation process. While holding colleges accountable for their outcomes is a much-needed reform, there are much better ways to accomplish this goal. The House has passed their bill and we now await seeing what the Senate will propose.

This piece will walk through the more concerning features of the proposal, what it could mean for students and institutions, and why—despite the rhetoric—it fails to meet the moment. This piece also includes a detailed explanation of how the proposal works. From weak incentives to perverse outcomes, the House GOP’s risk-sharing framework is in need of further discussion and improvements. Once reviewing these issues, it should be clear that the Senate must reject the House proposal and move forward with a better way to hold institutions accountable and protect student borrowers. With so much at stake for students trying to earn a degree and build a better future, we can’t afford to get this wrong.

The House Republicans’ language is almost identical to text introduced last summer in the College Cost Reduction Act (CCRA), a comprehensive higher education bill that included a complex risk-sharing framework for higher education. The proposal requires colleges to pay a percentage of unpaid debt, referred to as a non-repayment balance, that factors in graduates’ earnings relative to the price they pay for college. Using an earnings-to-price ratio for completers and a non-completion rate for non-completers, the bill establishes a percentage of the non-repayment balance that an institution is required to repay. (For a detailed explanation of how the proposal works and the factors it considers, see the appendix.)

Unfortunately, much of the data needed to model the policy are not publicly available. Even if they were available, the bill makes substantial changes to the federal student aid programs, which would interact with this policy, which also complicates its impact. For example, the legislation introduces new student loan repayment plans that would change how much borrowers pay and how long it takes them to repay than under current plans.

While it’s impossible to do a precise calculation, there are several estimates that have been published, likely giving institutions and the public a false sense of security that the impacts of the legislation are known. However, the analyses come to very different conclusions.

One dataset comes from the House Committee on Education and the Workforce after it released CCRA last year and provides an estimated risk-sharing payment for each college and university, including at the program level. These data provided estimates that individual colleges could look at to understand what their risk-sharing payment might be. Those payments range from under $100 to more than $97 million, for one year’s worth of cohorts.

The American Council of Education (ACE), the primary association representing institutions of higher education, conducted its own analysis to estimate the risk-sharing payments, as well as compared those estimates to those of the House Committee. Their analysis highlights how both the Committee’s and ACE’s estimates could wildly differ, and thus are likely incorrect. For example, the Committee data showed a median institutional risk-sharing payment of nearly $153,000. Meanwhile, ACE’s analysis showed a median risk-sharing payment of a little more than $292,000.

Neither the Committee nor ACE released detailed methodology, so we are unable to replicate either analysis. It is worth acknowledging that the CCRA estimates would differ from the reconciliation proposal because of changes to other provisions that have interactions. For example, the income-driven repayment proposal changed from CCRA to the reconciliation bill, which means the committee’s estimates might also change.

Another estimate of the potential effects of enacting the risk-sharing proposal is the score, or cost estimate, from the Congressional Budget Office (CBO). The first payments would not be made until fiscal year 2028, but CBO estimated that the risk-sharing payments would be expected to bring $5.3 billion total by fiscal year 2034. By 2034, CBO predicts that risk-sharing payments would be $1.3 billion in that year and would continue to increase after. CBO also estimates that there would be a reduction in institutional participation in student aid programs as institutions seek to avoid making risk-sharing payments by not participating in the loan program, closing programs, or closing the institution altogether. After all other policies in the bill, CBO estimated that the risk-sharing provision would reduce projected loan volume by roughly 20 percent and save approximately $4 billion by fiscal year 3034. (Note: the savings are substantially lower than estimates for CCRA, likely due to the less generous repayment plan in the reconciliation bill.)

While the focus of the proposal’s scrutiny is typically general opposition to requiring institutions to pay the government back, there are other concerns based on how that payment is determined. One key element of the policy that hasn’t received enough scrutiny is the duration for which institutions would be required to make risk-sharing payments for each cohort of students. The estimates released from both the House and ACE are only for a single year. But under the bill, institutions would owe a payment every year until there is no longer a non-repayment balance for that cohort.

This new system would not stop after a few years. Under the bill, the income-driven repayment plan available for new borrowers would extend the window to pay back their loans up to 30 years. That means institutions could be making risk-sharing payments for borrowers decades after they’ve graduated. Those borrowers’ children might be attending college by the time institutions make their final payment.

But what is also important to remember is that the payments aren’t just for the one year’s worth of cohorts for the life of their loans. Each year, there will be new cohorts of borrowers entering repayment. That means these institutional payments would increase with each additional cohort, and thus compound year after year, creating a growing financial obligation.

This is a concern because of the growing financial strain these payments will bring institutions, but the cost isn’t the only problem with this structure that holds institutions accountable for decades. While institutional accountability for student outcomes is essential, the farther out you measure those outcomes, the less they reflect the institution’s influence, and therefore, it doesn’t make sense to hold them accountable for decades into the future. Each additional year post-graduation introduces more external factors—such as labor market fluctuations, accumulated work experience, and evolving personal circumstances—that shape earnings and repayment. Holding a college accountable for student loan outcomes decades after graduation weakens the connection between institutional quality and accountability and dilutes the policy’s ability to drive timely improvements.

Another issue is the inconsistency in how the bill calculates key metrics. The bill would recalculate the non-repayment balance of loans annually, as loan payments change year to year. But it would not recalculate the earnings-to-price ratio each year, which is used to determine the percentage of the non-repayment balance that institutions would be required to pay. That metric remains static based on data one year after leaving college. This disconnect is problematic. The bill ignores how graduates’ earnings change over time, including across majors and degree levels. For instance, earnings typically increase more substantially a few years after graduation, especially for bachelor’s degree holders. Relying on a one-time snapshot of earnings just one year after completion fails to capture the reality of how pay increases over time. And it shortchanges programs that prepare students for long-term success.

Both the non-repayment balance and earnings-to-price ratio should be recalculated annually. That’s the only way to ensure the system reflects the real, evolving outcomes of students, and the true effect on students’ labor market outcomes that can be attributed to the programs and institutions that serve them.

If the goal of accountability is to protect students and taxpayers from low-quality programs that leave borrowers struggling to repay their loans, this proposal misses the mark in a big way. Under the House Republicans’ risk-sharing bill, colleges can continue to operate low-quality, high-debt programs year after year—even if those programs consistently fail students. So long as the institution is willing to pay a penalty, it can keep enrolling new students. That’s not accountability. That’s treating penalties as just another cost of doing business.

In a bizarre twist, the policy could actually reward schools with the worst outcomes. Under the bill, institutions would owe payments as a portion of the unpaid loans—but the bill’s calculation excludes loans that are in default. That means if a college produced many students who default on their loans, the school might actually owe less in risk-sharing payments. You read that right: the worst outcome for students, and the lightest financial consequences for the institution. As long as an institution passes the Cohort Default Rate (CDR) rule, it wouldn’t be held accountable or continue to pay a penalty for loans in default. (Under the CDR rule, an institution loses access to federal student aid if their CDR exceeds 40 percent in one year or 30 percent for three consecutive years.)

Real accountability means drawing a bottom line for the worst programs: if your program leaves students worse off, it doesn’t get access to federal dollars. For example, the gainful employment (GE) rule does that, and the bill’s cost estimates show that the provision repealing the GE rule and stopping poor-performing programs would cost taxpayers and students. But this bill doesn’t do that. Instead, it lets institutions pay for the privilege of continuing to offer failing programs. And those payments do nothing to provide relief to those struggling borrowers.

Another major loophole in the legislation: if a low-quality program opts out of federal student loans to avoid risk-sharing payments, it could still remain eligible for federal Pell Grants, which benefit low- and moderate-income students. Pell recipients could still enroll in these low-performing programs that lead to subpar earnings — but with no real accountability. Some students are also likely to be forced to turn to the private loan market to cover their expenses, which would put them at risk, given that the private loan market often has worse repayment terms and lacks access to important protections of the federal student loan program, such as IDR and forgiveness programs.

Accountability should be about improving outcomes—not enabling institutions to keep failing students while dodging responsibility. This proposal does the opposite.

At its core, the House Republicans’ risk-sharing proposal is a case study in how complexity can muddy, rather than clarify, accountability. The bill’s intricate design—distinguishing between completers and non-completers, applying value-added earnings thresholds, and calculating adjusted program prices—creates a system that is not only difficult to understand, but nearly impossible to implement effectively. While nuance is commendable, this level of complexity quickly becomes counterproductive. Policymakers understandably reach for complex solutions to tackle complex problems. It’s tempting to believe that a sophisticated formula can fairly capture performance across diverse institutions and student populations.

Implementing this policy would be a massive undertaking for the U.S. Department of Education. The cohort calculations alone would be a substantial burden. The Education Department would need to determine multiple student cohorts for every undergraduate and graduate program in the country. Every institution would have a cohort for every program at the undergraduate and graduate levels, one for every graduate program for non-completers, and one for the institution’s undergraduate non-completers. To estimate the number of cohort calculations required, we can look to federal data in the Integrated Postsecondary Education Data System (IPEDS), a collection of surveys that institutions are required to complete and transmit to the U.S. Department of Education on a variety of areas including enrollment, financial aid, graduation rates, finance, and more.

The IPEDS Completions Survey provides a good estimate of the calculations. In the most recent year, there were more than 5,800 institutions participating in the federal student aid programs reporting more than 260,000 programs. This means that there would be more than 340,000 cohorts for which the Education Department and the IRS would be required to make calculations in a single year.

The Department would have to identify all completer cohorts and share those with the IRS in order to calculate the earnings. Then, after calculating the median value-added earnings of each program, and after having collected the data from colleges on the cost of the program, the Department would calculate the earnings-price ratio. Non-completers would be next. The Department would need to determine the non-completion rate for every graduate program offered, as well as the institution’s undergraduate non-completion rate.

To calculate the non-repayment balance, the Department would have to begin collecting the amount paid each year, the amount of interest waived or forgiven that year, and the amount forgiven under certain forgiveness programs. Then those data would have to be calculated on the program level for completers and graduate non-completers. Then the Department would have to apply the appropriate repayment percentage to the respective program’s non-repayment balance to determine the repayment amount.

And that’s just for those calculations. That ignores the work required between the Department and institutions to ensure that the cohort students themselves are correct. And it doesn’t take into account the cost and work required to inform institutions of their required payment or collect the payment.

The House Republicans’ risk-sharing proposal is not just flawed in design—it’s unworkable in practice. Its complexity obscures accountability, invites gaming, burdens institutions, and overwhelms the very agencies tasked with enforcement. The sheer number of calculations required, the lack of existing data infrastructure, and the cascading effects of other policy changes make implementation nearly impossible—and outcomes dangerously unpredictable. In aiming to hold colleges financially responsible, this bill instead risks destabilizing the system without delivering better results for students or taxpayers.

Accountability in higher education is important. Students and taxpayers deserve to know that federal dollars are being spent on programs that lead to real opportunity, not broken promises. But accountability done wrong can do more harm than good.

Republicans’ risk-sharing policy doesn’t fix the problems in our higher education system—it adds to them. It’s a tangled mess of complex calculations, flawed incentives, and missing data that threatens to punish the wrong institutions, protect the wrong programs, and push students into worse outcomes.

We need smarter solutions—ones that are transparent, enforceable, and built on data that actually exists. That includes enforcing and strengthening regulations like gainful employment, improving financial value transparency, and giving the Department of Education the tools it needs to act when students are being failed.

There’s a better way forward. This proposal isn’t it.

How the Risk-Sharing Payment is Determined

The House Republicans’ proposal requires colleges to pay a percentage of unpaid debt that factors in student earnings relative to the price they pay for college. The calculation is complex and includes different payments for different cohorts of student borrowers, a non-repayment balance, which is the base amount colleges could be responsible for, multiplied by a percentage of earnings relative to price. To fully understand the implications of adopting the House Republicans’ risk-sharing plan, we need to look at each component of the calculation.

Who is in the Cohort?

The House Republican bill’s risk-sharing payment is based on three different categories of borrower cohorts that apply to each institution:

• Completing Student Cohorts: for each program of study, including undergraduate and graduate programs, all students who received federal student aid and completed that program in that year.
• Undergraduate Non-Completing Student Cohort: all students who received federal student aid who were enrolled in the institution during the previous year in a program of study leading to an undergraduate credential who have not completed the program and are not enrolled at the institution in any undergraduate program.
• Graduate Non-Completing Student Cohorts: for each graduate program, all students enrolled in such a program during the previous year who received federal financial student aid and have not completed that program and are no longer enrolled in that program.

The bill’s cohorts exclude borrowers who are in deferment for a number of reasons, such as being enrolled at least half-time in college; due to active duty military service during a war, military operation, or national emergency; and more.

What is the Non-Repayment Loan Balance?

The House Republican proposal uses a non-repayment loan balance in the calculation to determine the amount an institution is required to pay. This is the base amount to which a percentage will be applied to the payment. The bill defines non-repayment loan balance as the sum of the following:

• the difference between the total amount of payments due from all borrowers during that year and the total amount of payments made by all such borrowers during that year; plus
• the total amount of interest waived, paid, or otherwise not charged by the Secretary during the year under an income-based repayment plan or an income-contingent repayment plan; plus
• the total amount of principal and interest forgiven, cancelled, waived, discharged, repaid, or otherwise reduced by the Secretary under any other act during such year that was not discharged or forgiven under the teacher loan forgiveness program, total and permanent disability discharge, death discharge, or the Public Service Loan Forgiveness program..

Repayment Percentage Calculation

The legislation establishes a repayment percentage that is applied to the total non-repayment balance to determine the payment amount. There are three calculations—one for each of the three categories of borrower cohorts —to determine the percentage.

For completer cohorts, which must be determined for each program, the repayment percentage is equal to the earnings-price ratio, which is determined by dividing the median value-added earnings by the median total price (tuition, fees, and required costs, minus non-Title IV grants and scholarships) of the program. In this formula, “median value-added earnings” is defined as the program’s median borrower earnings minus either 150 or 300 percent of the federal poverty line, for undergraduate or graduate students, respectively. (The idea of measuring median program price is a new concept that is introduced in this bill and interacts with this policy. Some of those interactions will be explained later in the blog.)

For non-completer cohorts, the percentage would be equal to the percentage of students who did not complete their program within 150 percent of the program length. For the undergraduate completer cohort, this percentage is not based on the cohort that the non-completers are a part of; many of them likely started at different times. The bill instead takes the most recent non-completion rate for the institution’s undergraduate population. At community colleges, the non-completion rate would exclude students who completed a bachelor’s degree at another institution within the 150 percent time period, so that the institution is not penalized for students who complete after transferring. For graduate non-completer cohorts, the non-completion rate is based on each individual program because graduate students apply to individual programs, not to an institution like undergraduates, and therefore cannot switch programs as easily as undergraduates.

The bill provides for two special circumstances for completing student cohorts: high- and low-risk cohorts. For “high-risk cohorts,” cohorts with a negative median value-added earnings, the reimbursement percentage would be 100 percent. This means that programs whose median graduates’ earnings are below 150 percent of the federal poverty guideline would have to pay 100 percent of the non-repayment balance each year. On the other hand, “low-risk cohorts” whose median value-added earnings exceed the cost of the program would have a repayment percentage of 0 percent.