Four Possible Solutions to Student Loan Debt
The student loan crisis, as U.S. Rep. Eric Swalwell, D-Calif., described it, has long been limiting college graduates in their pursuit of the American dream. Young people are increasingly putting off major life decisions, like buying a house, starting a business or starting a family, because of student loan debt.
To address the student loan crisis, Swalwell reintroduced four bills targeting student loan debt in a week he dedicated to student loans in late June. His efforts show dedication and sympathy toward student loan borrowers. He wishes to “strengthen our economy and secure a brighter future for generations to come” by paving the way to ease the burden of student loan debt.
Know Your Repayments Options Act
The U.S. Department of Education offers 8 repayment plan options. Nearly 40 percent of borrowers are at least 90 days late on payments, but if they had known about the repayment plans available to them, would that have changed anything?
Swalwell hopes that knowing their options will help. His first bill would require the U.S. Department of Education Secretary to send an annual update to each borrower outlining the options available to them based on their loans and income. The update would include the following information for each option:
- Estimated monthly payment amount
- Yearly payment amount
- Lifetime payment amount
- Number of months left of repayment
- Amount that will be forgiven, if applicable
The bill also requires the update to include a link to the webpage where borrowers could change their repayment plan. To provide accurate information for each borrower, the bill instructs the Secretary to establish a procedure for gathering each borrower’s annual income and loan balances. Borrowers will have to provide consent for the information to be gathered and can opt out of receiving these updates.
Fairness in Forgiveness Act
The Public Service Loan Forgiveness program is generous in that it caps payments at 10 percent of a qualified borrower’s income for 10 years and then forgives the remaining balance.
However, the employment qualifications are very restrictive. Currently, borrowers must be employed by either the government or a specific type of non-profit organization (tax exempt 501(c)(3) organizations). Swalwell’s bill extends eligibility to certain contractor employees who work in any National Laboratory, which are overseen by the Department of Energy.
Five of the 16 U.S. Department of Energy National Laboratories are run by for-profit companies and three are operated by nonprofits that are not eligible under PSLF guidelines.
Strengthening Loan Forgiveness for Public Servants Act
This bill does two more things to PSLF: allows borrowers to defer their loans while in the PSLF program and builds in incremental forgiveness. Every two years, borrowers would be able to submit an employment certification form and have a percentage of their total amount due forgiven, as well as all interest accrued during the same time period.
Swalwell said, “Young people shouldn’t be dissuaded from pursuing a career in public service due to a looming, debilitating monthly student loan payment. The PSLFP does a good job of incentivizing a public service career, but it takes too long to help many people with debt.”
By incorporating partial forgiveness every two years, this bill lets borrowers who want to work for the public good but can’t commit the full 10 years currently required by PSLF to do so flexibly.
Student Loan Interest Deduction Act
Currently, a borrower whose marital status is single on a tax form can deduct $2,500 for interest paid on student loans. Swalwell believes that isn’t enough. This bill would double that. Additionally, current tax laws have an income cap ($65,000 for a single filer) for receiving a tax deduction for student loan interest, but the bill would eliminate it. For joint tax filers, the maximum tax deduction would increase to $10,000.
Swalwell hopes that this will benefit people living in high-cost areas, like San Francisco Bay Area, home of his Pleasanton constituency, where incomes can be high and at the same time not enough to live on because of student loans.
These four bills show that lawmakers know student loans are a problem, and they are trying to address them. All these bills have been introduced in Congress before, so it might be wise to keep your hopes in check.
Even if nothing comes of them, we can feel some relief that the student loan crisis is not going unseen by those making the laws in America.
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