HB 8759, the Student Loan Reform Act, would create a new federal student loan program in which colleges and universities may elect to cosign all eligible Direct Loans made to students enrolled at the institution beginning July 1, 2026. If an institution participates, it must sign the master promissory note for each new loan, accept cosigner liability terms, and potentially repay the outstanding principal and interest if a borrower defaults, remains in default for 90 days, and has not rehabilitated the loan. The institution’s repayment obligation would follow a standard 10-year repayment plan and end once the loan is rehabilitated or fully repaid.
The bill also directs the Secretary of Education to revise loan documents and publish a public list of participating institutions. In exchange for assuming this added risk, participating institutions would receive a lower interest rate on covered loans, with the reduction tied to the Secretary’s assessment of the reduced risk. The bill defines eligible direct loans as loans made on or after July 1, 2026.
In addition to the cosigner program, the bill changes the Higher Education Act’s cohort default rate threshold. Institutions in the cosigner program would face a 40 percent threshold, while institutions not in the program would face a 30 percent threshold, affecting when federal consequences tied to default rates are triggered. These amendments would take effect on July 1, 2026.
The bill’s impact would be significant for federal student loan administration and for higher education institutions, which would gain a new optional role as financial backstops for student borrowing. It would alter the Higher Education Act of 1965, especially Title IV loan provisions, by shifting some default risk from the federal government and borrowers to participating schools and by changing how default-rate accountability is measured.
No committee debate or votes are provided, so overall sentiment cannot be measured from recorded discussion. Based on the bill text alone, the proposal appears designed to encourage institutional accountability and potentially lower borrowing costs, but it also raises concerns about exposing colleges to repayment liability and changing incentives around admissions, lending, and student support. The main point of contention is likely whether schools should be allowed or expected to cosign student debt and absorb losses when borrowers default.
HB 8759 would amend the Higher Education Act of 1965 to add a new institutional cosigner program for federal Direct Loans and to revise cohort default rate thresholds. Participating colleges and universities would become liable for certain defaulted student loans, and the Department of Education would have to update promissory notes, administer the program, and publish participating institutions. The bill would also change the default-rate threshold from 30 percent to 40 percent for institutions in the program, while leaving a 30 percent threshold for nonparticipants.
There are no committee transcripts or recorded votes available, so there is no direct evidence of support or opposition from legislative debate. On its face, the bill reflects a reform-oriented approach to student lending that may appeal to those seeking lower interest rates and stronger institutional accountability. At the same time, the absence of discussion leaves unresolved whether lawmakers viewed the proposal as a useful risk-sharing mechanism or as an undue burden on colleges.
The central policy dispute is likely the requirement that institutions cosign federal student loans and repay defaults after 90 days, which could expose schools to substantial financial liability. Supporters would likely argue that this aligns institutional incentives with student success and reduces borrowing costs, while critics may argue it could discourage participation, shift costs to tuition or fees, or pressure schools to limit access for higher-risk students. Another likely point of contention is the higher cohort default threshold for participating institutions, which changes federal accountability rules and may be seen either as a reward for participation or as a weakening of default oversight.