There’s a new bill in the Senate aimed at making student loan payments more affordable. Sens. Marco Rubio (R-Fla.) and Mark R. Warner (D-Va.) introduced the Dynamic Student Loan Repayment Act on July 16, which proposes an automatic income-based adjustment to monthly payments for loans exceeding $10,000.
The effort follows last month’s unsuccessful attempt by Senate Democrats to offer borrowers the ability to refinance their loans and current rates, which, while higher than they were the past four years, are lower than they were between 2000 and 2009.
Taking an Ax to Monthly Loan Payments
Rubio and Warner’s proposal is designed to help new borrowers enter the workforce without worrying about unaffordable loan payments. Existing borrowers would be able to opt into the new system.
“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,” the senators said in a joint statement. Calling the current income-based-repayment system “complicated,” they billed their idea as a way to streamline the repayment process so borrowers won’t have to file paperwork to adjust their payments to their income.
The system in place allows borrowers with a partial financial hardship (as determined by the Department of Education) to apply for income-based repayment, which amounts to as much as 15% of the borrower’s monthly income. After 25 years of qualifying monthly payments, the remaining balance on the loan is forgiven. The Rubio-Warner bill also includes a provision for loan forgiveness after 20 years for loans less than $57,500 and after 30 years for loans exceeding that amount.
Grappling With the American Debt Problem
Student loan affordability has been a huge topic of conversation in Washington this year, though little has come of it. With a total of $1.2 trillion of outstanding education debt in America and the vast majority of current college students taking out loans, there’s a heightened sense of urgency to resolve an issue many associate with stagnant economic growth. Consumers dealing with large loan payments have a diminished capacity to spend and save, and they face potential negative effects on their credit standing from education loans. Here are some strategies for managing student loan repayment.
Until major changes come to the student loan business, borrowers must continue to manage their debts responsibly and take out loans only when necessary. If you have a student loan, do what you can to make your loan payments on time, because missing payments not only adds fees to what you owe, it can seriously damage your credit score. You can see how your student loans are impacting your credit scores for free on Credit.com.
More on Student Loans:
- How Student Loans Can Impact Your Credit
- Can You Get Your Student Loans Forgiven?
- A Credit Guide for College Graduates