Student loan borrowers would have their monthly bills automatically deducted from their paychecks if a Republican-backed proposal becomes law.
Sen. Lamar Alexander, R-Tenn, chairman of the Senate Health, Education, Labor and Pensions Committee, laid out the details of the massive overhaul to the student loan system in a speech earlier this month. The changes could affect some 40 million people.
Average debt at graduation is currently around $30,000, up from $10,000 in the early 1990s. The country’s outstanding student loan balance is projected to swell to $2 trillion by 2022.
Currently, borrowers are matched with companies that administer the federal student loan programs, and they have some 14 different ways to repay their education debt.
Under Alexander’s proposal, there would be just two repayment routes: one in which borrowers’ monthly bills are capped at 10 percent of their discretionary income and another that spreads their payments out over a decade. Employers would be responsible for taking the funds from their employees’ paychecks and sending them to the government. (Of course, student loan borrowers currently can set up automatic payments with their lender. They also typically get a discount on their interest rate for doing so).
“I think this proposal is likely to become law, after some tweaks,” said Mark Kantrowitz, a student loan expert