Here at the Student Loan Sherpa our focus is about helping people manage there student loan debt in the most painless way possible. Every once in a while, news breaks that could have an impact on those dealing with student loan debt. Today I learned of once such bit of news.
Karen Bass (D) of the California-37th recently introduced legislation (House Resolution 1330 – The Student Loan Fairness Act) that would dramatically change student loan repayment, both for public loans and private loans. Her fundamental proposal calls for a 10-10 repayment plan. Under this plan, borrowers of Federal Student Loans would be expected to pay ten percent of their income for ten years. At the completion of those ten years, the debt is forgiven. Its worth noting that there would be no public service requirement under this plan. Additionally, she calls for the public service forgiveness to be shortened from its current ten years down to five.
Bass’s proposed legislation addresses private loan debt in a couple of ways. First, it would limit the interest rate on all student loans, public and private, to 3.4%. Secondly, it “allow[s] existing borrowers whose educational loan debt exceeds their income to convert their private loan debt into federal Direct Loans.” Should this legislation pass it would offer a tremendous amount of relief for individuals who are paying large amounts in private loans.
Finally, according to Bass’s website, the last component of the bill “promotes financial responsibility in higher education and incentivizes students to be mindful of educational costs and for colleges and universities to control tuition increases.” However, the specifics of this last component have not been explained on her website.
Though I am far from an expert on legislation (unless repeated watchings of the Schoolhouse Rock – How a Bill Becomes a Law makes me an expert), this legislation likely doesn’t stand a chance. It is currently in committee, and given how conservative the House is right now, it will probably never see a vote. Additionally, private loan lenders are currently making a fortune on student loans, so their considerable lobbying power would represent an enormous obstacle.
Opponents of the bill will likely argue that the country cannot afford to offer this much debt relief in the current economy and that this is the sort of legislation that promotes irresponsible borrowing while penalizing those who have sacrificed to pay of their student loans.
Please leave a comment if you have any thoughts on the legislation or anything questions about what it might mean for you.