Colleges could co-sign student loans and face repayment if borrowers default

What does this do?

HR 8759 creates a voluntary program starting July 1, 2026, where colleges and universities can choose to co-sign federal student loans for their students. Schools that join must back every new federal loan their students take out that year. If a student defaults and 90 days pass without resolution, the school becomes responsible for repaying that loan on a standard 10-year schedule.

Who does it affect?

College and university administrators would decide whether their institution joins the program and takes on the financial risk. Current and future college students at participating schools would receive lower interest rates on their federal loans.

Why does it matter?

Schools that opt in are permitted a higher cohort default rate threshold of 40 percent before facing federal penalties, compared to the 30 percent standard applied to non-participating schools. Participating schools would absorb some costs of student loan defaults that would otherwise fall on the federal government and taxpayers.

What does it cost, and who pays?

• Schools repay defaults on 10-year schedule
• Student payments offset school's debt
• Default costs shift from government to schools