If you have a student loan, you might soon be forced to have your payment automatically deducted from your paycheck. This is usually a tactic used by collection agencies. If you’re not paying your debt, they have a variety of tools to get you to pay. Those tools can include docking your pay and taking your tax refund.
This time around, it’s a lawmaker who wants your student loan to be paid through your paycheck. Senator Lamar Alexander hopes to make this new process into law. The Republican senator from Tennessee laid out his plan earlier in February. He hopes to completely update the financial aid and student loan repayment systems.
Currently in the United States, 44 million Americans owe $1.53 trillion worth of student debt. This isn’t just a major problem for the students. It’s also a problem for the government who keeps issuing loans to people who can’t pay them back. While many of these students hope the government would just forgive the debt, the government, so far, doesn’t agree.
If you sign the dotted line to take out a student loan, it is your job to pay it back. That is the expectation when you take out any loan. But a larger portion of these borrowers are going into default and it’s leaving taxpayers to fill in the gaps. The Republicans in office don’t think that’s fair to the rest of the country.
A New Student Loan Plan?
Senator Alexander is a chairperson on the Health, Education, Labor, and Pensions Committee. It’s his job to help figure out solutions to these problems, including the mounting student loan crisis. Still, while it may seem extreme to expect these student loan payments to come directly out of your paycheck, the plan might be helpful in other ways.
For example, the individual will be placed in a repayment plan that would be based on your income. So, if you’re not making a lot of money, the amount taken out of your check would reflect that. The plan would never require a person to pay more than 10% of their current income. If you’re not making anything, you get a bit of a break.
“It makes sure if there were no money earned, there would be no money owed,” Alexander said. “And that would not reflect negatively on a borrower’s credit.” This new student loan plan would be equivalent to a 10-year mortgage with equal monthly payments.
An Accountability System
In addition to the idea above, Sen. Alexander’s plan would also come with some type of accountability system. The details of that system are unknown currently. Still, the senator believes there needs to be one in place to ensure you’re making payments on your student loan. If you’re doing as expected, the benefits would be positive.
Alexander believes this accountability system would lower the cost of tuition in many instances. It would also discourage schools from offering programs that aren’t worth it to students. “All three of these proposals should help students afford college and make sure that the degree they earn is worth the time and money they pay for it,” he said.
http://financialhelpers.com/new-report-finding-problems-with-student-loan-servicer-oversight/
Whether you agree this student loan program would work, at least they’re trying. It offers both benefits to the borrowers and ensures the government gets their money back. Federal Reserve chair Jerome Powell warned that this crisis could severely harm the economy. Millennials are hurt the most by student loan debt and it’s not looking good for the future if nothing is done.
