Issue Briefs

About

Risk sharing has been promoted by policymakers on both sides of the aisle as a way to make colleges share greater liability for the cost of their students' loan defaults. The theory is that colleges with "skin in the game" would work harder to ensure students succeed in order to avoid financial losses, and some advocates see it as a mechanism to reduce borrowing and defaults. While much of the original impetus targeted abuses in the for-profit sector, the bills introduced have generally applied to all sectors.

The most recent and consequential push came in 2025. The House Education and Workforce Committee's reconciliation bill (the "Student Success and Taxpayer Savings Plan") proposed a risk-sharing regime requiring institutions to reimburse the federal government for a portion of unpaid loans, including the cost of interest and principal subsidies, with payment size keyed to a program's median net price, the value-added earnings of recent graduates, and the share of students who fail to graduate on time. It was paired with a proposed grant program rewarding institutions that graduate a high percentage of Pell recipients at low cost, though it came with significant eligibility requirements that undercut its benefit. Committee Republicans described risk-sharing as critical, arguing it would penalize colleges for pushing students into unmanageable debt and incentivize them to lower costs.

Crucially, risk sharing did not survive in the final law. Instead, led by Senate Republicans, the reconciliation bill established a new accountability mechanism dubbed “do no harm,” or "gainful employment for all." Under that earnings standard, effective July 1, 2026, a program loses eligibility for federal student loans if its graduates' median earnings fall below those of a typical working adult with only a high school diploma (for undergraduate programs) or a bachelor's degree (for graduate programs), failing in two of three consecutive years.

Concerns with Risk-sharing Proposals

NAICU has and will continue to oppose institutional risk sharing. Our central objection is that the idea of risk sharing requires holding institutions accountable for outcomes well outside their control, such as the labor market a student enters upon graduation, the long-running labor market inequities that may influence their earnings outcomes, a recession, a health crisis, or simply the financial circumstances students may bring with them.

As a practical matter, requiring colleges to assume liabilities based on the federal loans their students take on would likely harm the very students the policy is intended to help, since resource-limited institutions, anticipating added expense, would be forced to make decisions antithetical to their missions, such as to raise tuition more than the absolute minimum required or limit enrollment of students from lower-income backgrounds because they statistically have a higher default risk and greater tendency to utilize loans.

NAICU also notes such proposals could damage institutional balance sheets and credit ratings, potentially pushing more schools to fail the federal Financial Responsibility Standards. Further, these proposals ignore the fact that private nonprofit colleges already have "skin in the game" through substantial institutional aid. By NAICU’s estimation based on Department of Education data, roughly two-thirds of all student aid awarded at private, nonprofit colleges comes directly from institutional resources. 

History

Risk-sharing proposals date at least to the 114th Congress (2015-16), including the Protect Student Borrowers Act of 2015 (Reed/Carney), which would have tied requirements to institutions' cohort default rates, while a Shaheen-Hatch bill tied penalties to cohort repayment rates and added a bonus for success with Pell recipients. Sen. Lamar Alexander issued a 2015 white paper on the topic, to which NAICU responded.

The idea returned in the 118th Congress via the College Cost Reduction Act (H.R. 6951), which paired an annual risk-sharing payment with eliminating Grad and Parent PLUS, and was cited in the FY2025 House budget resolution as a model. It advanced furthest in the 2025 House reconciliation bill before being dropped from the enacted OB3 bill in favor of the earnings-based accountability test.