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 2018!
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1 Important Disclosures for Earnest.
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 3.89% APR (with Auto Pay) to 6.97% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 6.23% 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 Month/Day/Year, 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 08/21/18. 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@example.com, or call 888-601-2801 for more information on ourstudent loan refinance product.
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2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
Savings example: average savings calculated based on single loans refinanced from 9/2013 to 12/2017 where borrowers’ previous rates were disclosed. Assumes same loan terms for previous and refinanced loans, and payments made to maturity with no prepayments. Actual savings for individual loans vary based on loan balance, interest rates, and other factors.
Application detail: 5 minutes indicates typical time it takes to complete application with applicant information readily available. It does not include time taken to provide underwriting decision or funding of the loan.
Instant rates mean a delivery of personalized rates for those individuals who provide sufficient information to return a rate. For instant rates a soft credit pull will be conducted, 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.
Total savings calculated by aggregating individual average savings across total borrower population from 9/2013 to 12/2017. Individual average savings calculation based on single loans refinanced from 9/2013 to 12/2017 where borrowers’ previous rates were provided. Assumes same loan terms for previous and refinanced loans, and payments made to maturity with no prepayments. Actual savings for individual loans vary based on loan balance, interest rates, and other factors.
3 Important Disclosures for SoFi.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.47% – 6.99%3||Undergrad & Graduate||Visit SoFi|
|2.47% – 6.23%1||Undergrad & Graduate||Visit Earnest|
|2.47% – 8.03%4||Undergrad & Graduate||Visit Lendkey|
|2.95% – 6.37%2||Undergrad & Graduate||Visit Laurel Road|
|2.48% – 6.25%5||Undergrad & Graduate||Visit CommonBond|
|2.72% – 8.32%6||Undergrad & Graduate||Visit Citizens|