Student Loan Repayment Legislation Update

It seems everyone these days has an opinion and a plan to solve the pending student loan debt crisis. Even the College Republican National Committee has a parody video to let party leaders and Democrats know about their ideas.

On a more serious note, there are several federal-level plans that have been introduced within the last year, several of which show great potential for the future. At present, Congress and the White House are actively talking about and debating the issue, particularly around the pending reauthorization this year of the Higher Education Affordability Act (HEA). The HEA, which was introduced by Senator Tom Harkin (D-IA) in the Senate’s Health, Education, Labor and Pensions (HELP) Committee, has four main – but vague – goals: increasing college affordability, helping struggling borrowers, strengthening accountability, and improving transparency.

A writer at the Yale Law Blog went so far as to say that much of the HEA “may really just be marker bills with more of an intention to promote the idea,” than to really see any action. One thing that almost all the proposed bills do not contain, including the HEA, is a forgiveness of existing debt. Loan forgiveness has been a frequent topic on Capitol Hill as well, but is separate from the many bill proposals related to altering student loan debt repayment.

Unlike many of the sponsored bills and draft legislation that have already died in the 2014 legislative sessions, several potential developments are still possible, and each would considerably change the way student loans are approved, dispersed and repaid. The most important to know for 2015 are:

  • Bank on Students Emergency Loan Refinancing Act: This proposal, presented by Senator Elizabeth Warren (D-MA) would create a refinancing option for more then 25 million people. The plan would allow those individuals to lower their interest rates that exceed the present 4%. However, in September of 2014 this plan was blocked by the GOP and has not seen action since.

  • Dynamic Student Loan Repayment Act: This bipartisan proposal has been one of the most talked about proposals to date. In its current form, the Act would replace current loans, subsidies, deferments, forbearances and repayment options with a single income-based loan referred to as the IDEA Loan (Income Dependent Education Assistance). Further, the co-sponsors, Senators Marco Rubio (R-FL) and Mark Warner (D-VA) propose that the Loan repayment would be done on income, and withheld from employer wages.

  • Earnings Contingent Education Loans (ExCEL) Act: Representatives Tom Petri (R-WI) and Jared Polis (D-CO) introduced this bill in both the 112th and 113th Congress. The bill would do away with the current various student loans such as the Grad Plus, Perkins and Unsubsidized loans) and employ a single income-based loan program. Employer holdings would also be used for this proposal and would impact 15% of income above 150% FPL. Additionally, when 50% of the loan amount has been paid off, the loan would stop accruing interest.

  • Financial Aid Simplification and Transparency (FAST) Act: Unlike other proposals, FAST aims to streamline and simplify the student loan process and repayment. The bipartisan proposal from Senators Lamar Alexander (R-TN) and Michael Bennett (D-CO) would offer a 10-year repayment plan or an income-based plan, both of which would be sued for their one-size-fits-all student loan.

  • Investing In Student Success Act: Created by Republican members from both chambers of Congress (Senator Marco Rubio (R-FL) and Representative Tom Petri (R-WI)) this bill addresses the private financing options for students to fund postsecondary education. Like other sectors, these are generally referred to as income share agreements, and would aim to protect students after graduation.