Merkley bill would assure affordable student loan repayments

Sen. Jeff Merkley (D-OR) and Rep. Rosa DeLauro (D-CT) introduced Wednesday the Affordable Loans for Any Student Act of 2019 , comprehensive legislation they said would ensure affordable, simple income-based repayment plans for any federal student loan borrowers.

The Senate legislation was co-sponsored by Senators Debbie Stabenow (D-MI), Kirsten Gillibrand (D-NY), Tammy Baldwin (D-WI), Richard Blumenthal (D-CT), Brian Schatz (D-HI), Ben Cardin (D-MD), Catherine Cortez Masto (D-NV), Chris Van Hollen (D-MD), and Ron Wyden (D-OR).

“I come from a blue-collar family and was the first in my family to go to college. I know firsthand that affordability is a major factor–in fact, often the biggest factor–in whether middle class students are able to realize the benefits of higher education,” said Merkley.

“Going to college should create a path to opportunity, not a millstone of debt hanging around young Americans’ necks. Many young Americans today are putting off buying houses, starting businesses, or even starting a family because of their student loan burden. It’s bad for our communities and terrible for our economy. Isn’t it time we had a simple, easy-to-use repayment system that ensured every student has an affordable loan option?”

“Our country’s next generation is incurring crisis levels of student debt, and one driver of that problem is that student borrowers often do not understand the myriad loan repayment options they are offered and which one would best serve them,” said DeLauro. “That leads to repaying more than they need to, or ending up in deferment or forbearance accruing additional interest. That is wrong, and Congress has an obligation to solve it. That is why I am proud to introduce the Affordable Loans for Any Student Act with Senator Merkley so we can simplify the process and make it more affordable for student borrowers.”

The average college senior who has taken out loans now graduates with more than $28,000 in debt, and total student debt nationwide has topped $1.5 trillion, creating a significant drag on the economy.

Many borrowers would benefit from a simple repayment plan based on their income, with a clear light at the end of the tunnel. Currently, however, there are at least five income-based repayment plans and dozens of confusing iterations. As a result, far too many borrowers fail to discover or successfully maintain income-based repayment until it’s too late.

The Affordable Loans for Any Student Act would overhaul and fix this dysfunctional system, streamlining existing programs and creating just two simple and easy-to-understand options for borrowers to choose from to ensure affordable monthly payments, avoiding loan delinquency or default.

The Affordable Loans for Any Student Act of 2019 would overhaul the confusing system of income-based repayment plans to give borrowers a simple choice between two plans:

A Fixed Repayment Plan with equal monthly payments sufficient to repay the loan and any accrued interest over a period of 10 years; or An Income-Based Repayment (IBR) Plan in which a borrower pays 10 percent of their income above a poverty level, capped at 20 years of payments.

In addition to streamlining repayment plans for borrowers, the bill:

Ends interest capitalization and origination fees on all loans, which can add thousands of dollars to a borrower’s total payments over the life of the loan. Targets assistance to struggling and low-income borrowers. Allows for automatic recertification of income for IBR plans. Limits aggressive federal debt collection amounts that are obtained through wage garnishment or tax offset to no more than the amount the borrower would pay under IBR. Replaces the current deferment and forbearance options into one, streamlined “pause payment” process that does not capitalize interest. Provides relief to severely delinquent borrowers and those who rehabilitate their loans by automatically enrolling them into the IBR plan. Changes the use of the confusing term “master promissory note” to “student loan contract” to improve consumer understanding of the purpose of the document. Improves other loan disclosures and interactive counseling.

The legislation is officially endorsed by The Institute for College Access & Success (TICAS) and Consumer Action.

“For many, college is the best investment of a lifetime, but millions of students who borrow to earn a degree struggle under their debts, and more than one million of them default every year,” said James Kvaal, President, The Institute for College Access & Success. “Students urgently need the reforms in the Affordable Loans for Any Student Act , which would simplify repayment options, improve students’ access to information, and reduce defaults. We applaud Senator Merkley for his leadership on this bill.”

“We applaud Senator Merkley for exploring new solutions to our nation’s student debt crisis,” said Linda Sherry, Consumer Action’s Director of National Priorities. “The current student loan system is rigged against borrowers–even the most industry-savvy borrowers have problems navigating their repayment options, or getting straight answers from loan servicers.

“The Affordable Loans for Any Student Act would ensure loan terms are written in consumer-friendly language, streamline income-based repayment plans, limit aggressive debt collection practices, and provide loan counseling to those who are struggling. The bill provides borrowers with the resources they need to take control of their financial health and better manage their student loan debt.”