WASHINGTON – If the Congressional Budget Office is right, the recently-passed bipartisan student loan bill should be able to keep interest rates under the current level for at least four more years.
By Kavya Sukumar
But the lawmakers aren’t likely to wait for that long before bringing the issue back for debate. Some say they will advocate for a simplified process to help students repay loans.
In fact, when Congress approved the bill last week, it really was a “let’s get this done first and talk later” situation.
“This bill is but the first step,” Rep. Jared Polis, D-Colo., said right before the House finished its work and forwarded the legislation to the White House.
And Polis’s next focus? Simplify.
The congressman encouraged his colleagues to quickly consider another bill, calling for a universal income-based repayment system. The plan, initiated by Rep. Tom Petri, R-Wis., and cosponsored by Polis, would ask borrowers to set aside approximately 15 percent of income (after allowing for the standard federal income tax exemption) to pay off student loans debts. Interest would not compound during repayment and would stop accruing when it reached half of the loan’s balance upon graduation.
“This zeros in like a laser on the situation of the person who is struggling with repaying their loans because they just don’t have the earnings that they hope they will have,” Petri said.
Under the existing federal aid system, the income-based repayment option was open only to borrowers who can prove certain financial hardship, which often leads to complicated paperwork.
Petri’s plan would “allow us to basically eliminate a whole bunch of unnecessary paperwork by getting rid of a number of different exemptions and waivers that’s existing in the program,” Polis said. That would help “pump some of the savings back to reduce student loan interest rates.”
“Hopefully this income-based repayment concept, which has support from both sides of the aisle as well as the president, will become a part of the centerpiece of student loan reform,” he said.
The lawmakers hope their bill, which aims to tailor an affordable plan for each borrower, would reduce the amount of default loans in the country and thus relieve pressure on the government’s annual deficit. According to Petri, more than 13 percent of those who take out federal student loans will default within three years of entering repayment.
Some other lawmakers, however, insisted that the federal government should not try close budget gaps in Washington by squeezing students. In that camp is Sen. Elizabeth Warren, D-Mass., who took a stand against her own party by opposing the student loan bill approved last month. Warren, a former professor at the Harvard Law School, called the new rates a teaser and said she wanted to lower them.
“The vote may be over, but our fight to make college more affordable – and the fight for a better deal for our students – is just getting started,” Warren said in a statement. “As long as the government continues to make hundreds of billions in profits off our students, I’ll keep fighting.”
Many universities and borrowers hailed Warren’s bill, which would reduce student loan interest rates to as low as 0.75 percent. Critics of the higher rates say they impede the economy as graduates use their money to repay loans instead of spending and investing it. Some worry that the escalating cost of college will doom America’s education system and even harm the country’s international reputation.
“One of the remaining primary resources that we have available thatis very attractive to other countries is our educational system, and particularly our higher education system,” said Ann Wightman of Dayton, Ohio, who is sending her daughter to college this fall. She called for more responsibility but less profit from the government on student loan programs, “It seems to me a ridiculous debate to even have.”