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

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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.

Interested in refinancing student loans?

Here are the top 6 lenders of 2020!
LenderVariable APREligible Degrees 
1.99% – 5.64%1Undergrad
& Graduate

Visit Earnest

1.89% – 5.90%2Undergrad
& Graduate

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2.25% – 6.09%3Undergrad
& Graduate

Visit SoFi

1.89% – 6.77%4Undergrad
& Graduate

Visit Splash

2.39% – 6.01%Undergrad
& Graduate

Visit Elfi

1.99% – 5.41%5Undergrad
& Graduate

Visit CommonBond

Check out the testimonials and our in-depth reviews!
1 Important Disclosures for Earnest.

Earnest Disclosures

To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.

Earnest fixed rate loan rates range from 2.98% APR (with Auto Pay) to 5.79% APR (with Auto Pay). Variable rate loan rates range from 1.99% APR (with Auto Pay) to 5.64% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of July 31, 2020, and are subject to change based on market conditions and borrower eligibility.

Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.

The information provided on this page is updated as of 7/31/2020. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at [email protected], or call 888-601-2801 for more information on our student loan refinance product.

© 2020 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.


2 Important Disclosures for Laurel Road.

Laurel Road Disclosures

All credit products are subject to credit approval.

Laurel Road began originating student loans in 2013 and has since helped thousands of professionals with undergraduate and postgraduate degrees consolidate and refinance more than $4 billion in federal and private school loans. Laurel Road also offers a suite of online graduate school loan products and personal loans that help simplify lending through customized technology and personalized service. In April 2019, Laurel Road was acquired by KeyBank, one of the nation’s largest bank-based financial services companies. Laurel Road is a brand of KeyBank National Association offering online lending products in all 50 U.S. states, Washington, D.C., and Puerto Rico. All loans are provided by KeyBank National Association, a nationally chartered bank. Member FDIC. For more information, visit www.laurelroad.com.

As used throughout these Terms & Conditions, the term “Lender” refers to KeyBank National Association and its affiliates, agents, guaranty insurers, investors, assigns, and successors in interest.

  1. Checking your rate with Laurel Road only requires a soft credit pull, which will not affect your credit score. To proceed with an application, a hard credit pull will be required, which may affect your credit score.
  2. Savings vary based on rate and term of your existing and refinanced loan(s). Refinancing to a longer term may lower your monthly payments, but may also increase the total interest paid over the life of the loan. Refinancing to a shorter term may increase your monthly payments, but may lower the total interest paid over the life of the loan. Review your loan documentation for total cost of your refinanced loan.
  3. After loan disbursement, if a borrower documents a qualifying economic hardship, we may agree in our discretion to allow for full or partial forbearance of payments for one or more 3-month time periods (not to exceed 12 months in the aggregate during the term of your loan), provided that we receive acceptable documentation (including updating documentation) of the nature and expected duration of the borrower’s economic hardship. During any period of forbearance interest will continue to accrue. At the end of the forbearance period, any unpaid accrued interest will be capitalized and be added to the remaining principle amount of the loan.
  4. Automatic Payment (“AutoPay”) Discount: if the borrower chooses to make monthly payments automatically from a bank account, the interest rate will decrease by 0.25% and will increase back if the borrower stops making (or we stop accepting) monthly payments automatically from the borrower’s bank account. The 0.25% AutoPay discount will not reduce the monthly payment; instead, the discount is applied to the principal to help pay the loan down faster.

Assumptions: Repayment examples above assume a loan amount of $10,000 with repayment beginning immediately following disbursement. Repayment examples do not include the 0.25% AutoPay Discount.

Annual Percentage Rate (“APR”): This term represents the actual cost of financing to the borrower over the life of the loan expressed as a yearly rate.

Interest Rate: A simple annual rate that is applied to an unpaid balance.

Variable Rates: The current index for variable rate loans is derived from the one-month London Interbank Offered Rate (“LIBOR”) and changes in the LIBOR index may cause your monthly payment to increase. Borrowers who take out a term of 5, 7, or 10 years will have a maximum interest rate of 9%, those who take out a 15 or 20-year variable loan will have a maximum interest rate of 10%.

KEYBANK NATIONAL ASSOCIATION RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE.

This information is current as of September 9, 2020. Information and rates are subject to change without notice.
 


3 Important Disclosures for SoFi.

SoFi Disclosures

  1. Student loan Refinance: Fixed rates from 2.99% APR to 6.09% APR (with AutoPay). Variable rates from 2.25% APR to 6.09% APR (with AutoPay). Interest rates on variable rate loans are capped at either 8.95% or 9.95% depending on term of loan. See APR examples and terms. Lowest variable rate of 2.25% APR assumes current 1 month LIBOR rate of 0.18% plus 2.32% margin minus 0.25% ACH discount. Not all borrowers receive the lowest rate. If approved for a loan, the fixed or variable interest rate offered will depend on your creditworthiness, and the term of the loan and other factors, and will be within the ranges of rates listed above. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. See eligibility details. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. *To check the rates and terms you qualify for, SoFi conducts a soft credit inquiry. Unlike hard credit inquiries, soft credit inquiries (or soft credit pulls) do not impact your credit score. Soft credit inquiries allow SoFi to show you what rates and terms SoFi can offer you up front. After seeing your rates, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit inquiry. Hard credit inquiries (or hard credit pulls) are required for SoFi to be able to issue you a loan. In addition to requiring your explicit permission, these credit pulls may impact your credit score. Terms and Conditions Apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. 

4 Important Disclosures for Splash Financial.

Splash Financial Disclosures

Terms and Conditions apply. Splash reserves the right to modify or discontinue products and benefits at any time without notice. Rates and terms are also subject to change at any time without notice. Offers are subject to credit approval. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet applicable underwriting requirements. Not all borrowers receive the lowest rate. Lowest rates are reserved for the highest qualified borrowers. If approved, your actual rate will be within a range of rates and will depend on a variety of factors, including term of loan, a responsible financial history, income and other factors. Refinancing or consolidating private and federal student loans may not be the right decision for everyone. Federal loans carry special benefits not available for loans made through Splash Financial, for example, public service loan forgiveness and economic hardship programs, fee waivers and rebates on the principal, which may not be accessible to you after you refinance. The rates displayed may include a 0.25% autopay discount.

The information you provide to us is an inquiry to determine whether we or our lenders can make a loan offer that meets your needs. If we or any of our lending partners has an available loan offer for you, you will be invited to submit a loan application to the lender for its review. We do not guarantee that you will receive any loan offers or that your loan application will be approved. Offers are subject to credit approval and are available only to U.S. citizens or permanent residents who meet applicable underwriting requirements. Not all borrowers will receive the lowest rates, which are available to the most qualified borrowers. Participating lenders, rates and terms are subject to change at any time without notice.

To check the rates and terms you qualify for, Splash Financial conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, the lender will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

Splash Financial and our lending partners reserve the right to modify or discontinue products and benefits at any time without notice. To qualify, a borrower must be a U.S. citizen and meet our lending partner’s underwriting requirements. Lowest rates are reserved for the highest qualified borrowers. This information is current as of September 10, 2020.


5 Important Disclosures for CommonBond.

CommonBond Disclosures

Offered terms are subject to change and state law restriction. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900), NMLS Consumer Access. If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. ‍All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 0.16% effective August 10, 2020.

Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print to help you understand what you are buying. Be sure to consult with a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time.