A bipartisan effort addressing the student loan crisis is underway with new legislation aimed at making payments more manageable and reducing defaults. The Dynamic Repayment Act was introduced in the Senate last week by Senators Marco Rubio (R-Fl.) and Mark Warner (D-Va.). Struggling borrowers are no doubt hopeful about possible relief, but no one should hold their breath. Congress will still have to approve.
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The bill proposes to enroll all federal loan borrowers into a program where they pay 10 percent of their earnings each month toward student loan repayment, with a $10,000 annual exemption. The money would be taken directly from borrower’s paychecks. Borrowers could also opt out of the program and prepay their loans without penalty if they choose.
Another feature of the bill proposes to forgive up to $57,500 of loans after 20 years, and loans greater than that amount would be forgiven after 30 years.
As the situation stands now, student loan debt is at $1.2 trillion and the share of loans delinquent 90 days or more has risen to 11.5 percent, according to the Federal Reserve Bank of New York.
Rubio and Warner explain their bill in a joint statement.
“Our current loan repayment system often turns what should be reasonable debts into crippling payments,” the Senators say. “Some graduates find they are forced to work multiple jobs, often in fields they didn’t train for, simply to avoid defaulting on student loans.”
Student loans have become a hot issue amongst politicians who want to reach a younger support base as they lay the groundwork for the next presidential race. Whoever gets to take credit for rescuing America from the shackles of student loan debt will certainly have an advantage.
Senator Elizabeth Warren (D-Ma.) introduced a bill last month that would help about 25 million student-loan holders obtain lower interest-rate refinancing. However, the bill was blocked by Republicans, including Rubio, who voted against the measure.
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