Top 6 Things Congress Could Change to Help Struggling Student Loan Borrowers

student loan refinance bill

On a national level, a debate rages over whether the country’s growing student loan debt will be the next bubble to devastate our economy.

But if you’re one of the more than 44 million Americans with student loans, you’re probably just struggling to make payments and wondering how you’ll ever pay off your five- or six-digit student loan debt.

The good news is that you have options to manage your debt right now. Strategies such as consolidation, income-based repayment, and private refinancing can ease the burden.

But what if our lawmakers got a little more involved? Here are some of the top ways Congress could help struggling student loan borrowers.

1. Pass a federal student loan refinance bill

The federal government is already involved with student loans, thanks to student aid such as the Direct Loan program. Though student loan servicing is contracted out to private companies, the government funds federal student loans.

But for years Sen. Elizabeth Warren, D-Mass., has been trying to get a student loan refinance bill passed in Congress.

Though you can currently consolidate your loans through the federal government, you can only refinance privately. Refinancing your federal loans with a private company means giving up access to programs like Public Service Loan Forgiveness and income-driven repayment.

A federal refinancing program like the one Warren proposed would allow borrowers to refinance student loans at a lower interest rate — without losing the flexible repayment options and forgiveness opportunities that come with federal student debt.

Unfortunately, since her efforts began in 2014, they have been blocked. “Millions of young people are just stuck,” Warren said, according to The Hill. “They can’t buy homes, they can’t buy cars … all because they are struggling under the weight of student loan debt.”

2. Keep federal student loan interest rates low

Another crusade of Warren’s has been to keep student loan interest rates low. In fact, her first piece of legislation, introduced in 2013, was aimed at letting students borrow at the same rate as bankers.

“We shouldn’t be profiting from our students, who are drowning in debt, while giving a great deal to the banks,” said Warren, according to Time. “That’s just wrong.”

Congress sets federal student loan interest rates. Members of Congress could choose to allow students to borrow at much lower rates, similar to the rates the government charges big banks.

However, things are currently moving in the wrong direction. Federal student loan rates will be updated on July 1, 2017. The rate will be 4.45% on Direct Subsidized and Unsubsidized Loans for undergraduates — an increase from the previous rate of 3.76%.

3. Stabilize the Public Service Loan Forgiveness (PSLF) program

This October, the first cohort of borrowers applying for forgiveness under Public Service Loan Forgiveness will become eligible to receive their rewards for working at a nonprofit or public service job.

However, the program’s future could be in trouble. The Department of Education may not honor PSLF certification letters. Plus, the proposed budget from President Trump would eliminate the program for future borrowers.

Brian Meiggs, the founder of Millennial Money Guide, said that, rather than ditching PSLF, Congress should move to shore it up.

“Congress should push to make the program more stable,” he said. “In an era where government programs are always shifting, this program should stay to help student loan borrowers.”

Meiggs went on to point out that there “is a lot of fine print in the PSLF paperwork that essentially translates, to laymen’s terms, ‘if everything goes to plan.’ Congress can help advance this program so that it is less of a gamble for public service employees.”

4. Incentivize employers to provide student loan benefits

Some companies are offering to help pay down student loan debt, much the same way they contribute to retirement plans. Unfortunately, these efforts don’t offer a tax benefit to employers the same way contributions to an employee’s 401(k) does.

“The fact that healthcare benefits and 401(k) plans are now widely offered by employers is a direct result of Congress passing legislation to encourage and incentivize those benefits through the tax code,” said Tim DeMello, the founder and CEO of Gradifi, a company that helps employers pay down its workers’ student loans.

Employers could use a nudge from Congress to make this benefit more widely available. “If Congress were to enact legislation to allow employees to receive tax-exempt contributions from employers, we would hope to see the number of employees getting student loan repayment assistance grow considerably,” said DeMello.

DeMello claimed that student loans impact seven out of 10 people graduating from college. With the financial stress of student loans weighing on borrowers, workers are less productive, according to PricewaterhouseCoopers.

“It’s a real source of stress for employees entering the workforce,” DeMello continued. “Employers can help reduce the total cost and time to repayment.”

5. Require student loan servicers to provide better information

The Department of Education, led by Secretary Betsy DeVos, recently rolled back memos from the Obama Administration instructing federal loan servicers to work on behalf of students.

Even though servicers are supposed to share information about income-driven repayment and other programs with borrowers, many of them don’t.

A report from the Government Accountability Office indicated that the Department of Education doesn’t adequately prepare borrowers. On top of that, the Consumer Financial Protection Bureau (CFPB) reported that many borrowers aren’t enrolled in affordable repayment plans after defaulting on loans.

“It’s ridiculous,” said Jay Fleischman, a lawyer specializing in student loans. “Our government should be taking steps to help its citizens and protecting them from servicers. Instead, the focus seems to be on profits for the industry.”

If the Department of Education won’t act to hold student loan servicers accountable, Congress could pass laws requiring servicers to act in borrowers’ best interests. Congress could also move away from efforts to reduce the impact of the CFPB and instead provide the resources to allow the Bureau to enforce better practices.

6. Get rid of taxes on student loan debt forgiveness

Currently, if you are enrolled in an income-driven repayment plan, any loan balance remaining after 20 or 25 years is forgiven. The catch? You have to report that amount as income on your taxes.

Steven D. Snyder is a writer, actor, and comedian. He has two Master’s degrees and struggles with his student loan payments.

“Congress needs to get rid of the tax on student loan forgiveness,” Snyder said. “You’ve been paying for 20 or 25 years. You’ve paid interest and everything, and now when it’s forgiven it counts as income. If you have tens of thousands of debt remaining, that can be a devastating tax bill.”

There is already precedent for tax-free student loan forgiveness: PSLF won’t tax borrowers for forgiven loans. Congress could amend the current guidelines to give borrowers who earn loan forgiveness through other federal programs the same benefit.

What can you do to advance a student loan bill?

One of the most important things to remember is that Congress is supposed to represent us. If there is a piece of legislation you’re interested in or if you think your representative should introduce legislation to help student loan borrowers, contact them.

Not sure where to start? Enter your address and state into GovTrack.us and see exactly who your representatives are, what their contact information is, and how they’ve voted in the past. If you disagree with their voting record on student loan issues, be vocal and let them know about it.

You can also get involved at the state level. Many states are taking student loan relief into their own hands — just look at New York’s introduction of free college tuition. Lobby for such programs in your own state; your state’s legislature should have a website where you can look up your representatives.

Lastly, talk to your friends and neighbors about the national student loan burden and organize letter-writing or calling campaigns to let your representatives know what’s important to you. Whether you support a student loan refinance bill, an end to taxation on debt forgiveness, an expansion of PSLF, or any other policy you think would positively benefit a large number of Americans, speak up now to begin enacting change.

Want to learn more about student loan legislation that’s in the works? Check out our student loan bill tracker to see what’s on the horizon.

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