A new bipartisan bill reinforces the notion that Republicans are trying to make mounting student debt as much their issue as it has been that of Democrats, especially President Obama and Massachusetts Sen. Elizabeth Warren.
The bill proposes to have federal student loan payments automatically adjusted based upon income. Borrowers would be able to repay loans at a more affordable pace, with more manageable payments. That could provide huge relief to millions of young people starting their careers heavily in debt after graduation
The Dynamic Student Loan Repayment Act, introduced by Florida Republican Sen. Marco Rubio, in collaboration with Democratic Sen. Mark Warner of Virginia, would significantly simplify the current system of public education loans administered by the U.S. government.
Essentially, the bill would enroll all borrowers into an income-based repayment program that would put 10 percent of their post-graduation earnings towards debt repayment, with payments being automatically deducted from a borrower’s paycheck, much as payroll taxes are today.
For those earning less than $10,000, no payment at all will be expected, and after 20 years debt amounts of less than $57,500 will be entirely forgiven. For amounts greater than that, 30 years will be required, a provision that should discourage people from intentionally taking on large loans.
“On average, today’s graduates carry nearly $30,000 in student loan debt. But our current loan repayment system often turns what should be reasonable debts into crippling payments. Some graduates are forced to work multiple jobs, often in fields they didn’t train for, simply to keep from defaulting on these loans,” Rubio and Warner said in a joint statement
Total U.S. student loan debt now tops $1.2 trillion, surpassing credit card debt as the largest financial obligation of U.S. households.
Despite Warner’s involvement, the bill is expected to be placed on the back-burner for now. Democrats, who are in control of the Senate, have supported a different proposal by Massachusetts Sen. Elizabeth Warren.
Last month, the Senate failed to advance Warren’s proposal that would have lowered interest rates charged on many pre-existing student loans,
Democrats are vowing to keep the issue alive and bring it back for another airing this year.