Merkley, Hassan Propose New Student Loan Repayment Plans

WASHINGTON — Sens. Jeff Merkley, D-Ore., and Maggie Hassan, D-N.H., on Wednesday unveiled legislation that introduces new income-based repayment plans for all federal student loan borrowers.

The bill, entitled the Affordable Loans for Any Student Act of 2022, presents new options for federal borrowers to structure student loans in income-based repayment plans. The first newly proposed option would allow borrowers to pay 10% of any income they earn above the poverty level until their loan is paid off or until they have made 20 years of payments.

The second option allows borrowers to repay on a fixed plan with equal monthly payments including interest over a period of 10 years. Under current law, lenders are permitted to capitalize unpaid interest on federal direct loans if the interest isn’t paid as it accrues. Another provision of the bill would eliminate this option.

“Higher education should create a path to opportunity, not a ball and chain of debt hanging around young Americans’ necks,” Merkley said in a written statement.

“I come from a blue-collar family and am a first-generation college graduate. I know firsthand that affordability is a major factor — in fact, often the biggest factor — in whether middle-class students are able to obtain the benefits of higher education. Right now, our student debt crisis is holding our whole nation back.”

The introduction of the legislation comes roughly a month before the pandemic-era pause on federal student loans is set to expire. Federal student loan borrowers are set to resume their payments on May 1 should President Biden not extend the pause.

White House Chief of Staff Ron Klain has maintained that Biden is still considering whether to extend the pause through executive action and plans to make a decision prior to the May 1 restart.

Further, the Biden administration’s $5.8 trillion budget proposal introduced earlier this month does not include any direct student loan relief like payment forgiveness or interest relief.

The plan does include $2.7 billion in additional funding for improving “customer service” for federal borrowers, according to the White House.

On average, college seniors who take out federal student loans graduate with nearly $30,000 in debt and the nationwide student debt total has surpassed $1.6 trillion, according to the Department of Education.

“Student loan debt is burdening young Americans and dragging our economy down with it,” Hassan said in a written statement. “This commonsense bill will help make it easier for borrowers to make their payments while giving them the freedom to pursue their careers—whether that is to start their own business or enter into public service.

“We must take action to help ensure that borrowers are not crushed by the weight of student debt, and this bill is one important step to help do just that.”

The senators’ bill would overhaul the current federal student loan system which features at least four income-based repayment plans in dozens of iterations.

The act introduced on Wednesday would grant assistance to low-income borrowers, limit federal debt collection amounts obtained through wage garnishment or tax offsets and replace the current deferment and forbearance options into a streamlined “pause payment” process that does not capitalize accrued interest.

Additionally, the debt restructuring proposal would grant relief to significantly delinquent borrowers and individuals who rehabilitate their loans by automatically enrolling them into the income-based repayment plan.

The bill would also allow for automatic recertification of income for income-based repayment plans, modify other loan disclosures and interactive counseling to increase awareness of federal student aid and repayment options and replace the term “master promissory note” with “student loan contract” in order for prospective borrowers to better understand the purpose of the document.

The Senate version of the bill is cosponsored by Sens. Catherine Cortez Masto, D-Nev., Brian Schatz, D-Hawaii, Ron Wyden, D-Ore., Chris Van Hollen, D-Md., Tammy Baldwin, D-Wis., Richard Blumenthal, D-Conn., Ben Cardin, D-Md., and Cory Booker, D-N.J.

Rep. Rosa DeLauro will carry the House version of the bill, where it is cosponsored by Reps. Jahana Hayes, D-Conn. and Mary Gay Scanlon, D-Pa.

“Every young person in America should have the opportunity to get a good education without getting trapped into a lifetime of student loan debt,” DeLauro said in a written statement.

“Young college graduates with good jobs are struggling to make the first big investments in their lives like buying a home, or even to purchase necessities and pay rent because of the debt that they hold.”

She continued, “For our next generation to fulfill their dreams, contribute to economic innovation and create a prosperous future for themselves and their families, we must simplify the repayment process and make it more affordable for student borrowers.”
Reece can be reached at [email protected].