As we enter the prime 2020 election messaging time, it seems as if more people are finally talking about student loans. Elizabeth Warren, Bernie Sanders, and other Democratic candidates have their own views. President Trump doesn’t seem to care too much about the student loan debt burden.
One Republican seems to be breaking with party ranks to create a plan that can help change how student loans are paid. He introduced a new bill this week called The Leveraging Opportunities for Americans Now Act, or the Loan Act. The goal of this bill would be to entirely eliminate interest from student loans
“When I finished school, I had a little over $130,000, $140,000 in student loans,” Sen. Rubio said. “And it was really a burden for a long time.” He understands the burden millions of Americans are facing. Taking out a student loan can take decades to pay back. Interest rates are a big reason why, as you end up paying thousands of additional dollars.
Rubio wants to change that.
“If you take out a $10,000 loan, rather than charging interest that grows over time, there would be a flat fee of about 25% of the size of the loan, so you’d owe $12,500,” Rubio explained. “But that fee doesn’t grow. That’s what you owe. A $10,000 loan costs $12,500, and that’s what it’s going to cost the whole time. You don’t have to worry about if it takes you 20 years, that could grow to $25,000, you know? It could double!”
A New Way to Pay for Student Loans
Rather than having your student loans grow over time, you would have a flat fee added to it. Once you graduate school, you’d automatically be entered into a repayment plan that is based entirely on your income and ability to pay. Rather than letting student loans inhibit your life, you would instead focus 10% of your earnings towards paying back the loan.
Now that it’s spring, we have a whole new class of graduates ready to throw their caps into the air. Paying back student loans is most likely on the forefront of their minds. If it’s not, they’ll have their first bill sent to them very quickly. It’s sure to dampen any graduation celebrations they have this summer.
It’s estimated that as many as 44 million Americans owe over $1.53 trillion in student loans. That’s a number that continues to grow with each passing year. Perhaps Rubio’s plan is exactly what students need to survive without accruing interest making their problem larger over time. The typical borrower holds around $25,000.
“We want to make sure we can provide these loans, provide them and pay for the cost of servicing the loans, but at the same time, not try to compound the interest rate that hurts the borrowers,” he said.