We’re over a year and a half from the 2020 elections, but there’s already over a dozen presidential candidates (Democrats, Republicans, and Independents) who are running, or considering running, for president.
Now more than ever, I anticipate that student loan debt – which currently tops $1.5 trillion – will be one of the biggest issues discussed on the campaign trail. After all, over 40 million Americans have student loans. Candidates will need to craft bold policy proposals to differentiate themselves and make them stand out to voters. And if even some of these policy ideas get turned into actual legislation, they could transform the student debt landscape and our entire system of financing education. Here are some bold ideas to watch for during the next year and a half.
Debt-Free College
There are already multiple proposals to reduce or eliminate college tuition at public universities, or at the very least, get rid debt-financed college degrees. House Democrats have already proposed the Aim Higher Act, which would increase grant-based federal aid and provide federal financial incentives to states to eliminate or reduce tuition at state universities. Some states have already gotten ahead of the curve to implement debt-free college programs. New York, for example, has proposed free tuition at state colleges for students from lower-income families who commit to remaining in New York after graduation.
Refinancing Programs
Addressing the ongoing increase in student debt by steering students away from debt-financed degrees will be an important component of any student loan reform policy. But lawmakers will still have to address the $1.5 trillion in student loan debt that already exists. One idea to help borrowers contain the cost of student loan repayment would be a federal program that allows them to refinance their student loans – both federal loans and, potentially, private loans – at much lower interest rates. Senator Elizabeth Warren (who is running for president) proposed such a bill back in 2014, although it did not pass.
Supporters say this could drastically reduce the cost of student loan repayment. Detractors, however, argue that this would disproportionately benefit higher-income earners, since student loans made to parents and graduate students tend to have higher interest rates than undergraduate student loans, and these people tend to make more money, too.
Caps On Interest Accrual
Reducing interest rates would be one way to lower the cost of student loan repayment. Another option would be to cap the amount of interest that can accrue on a student loan – perhaps at a percentage of the original principal balance. It’s not uncommon for student loan borrowers to wind up repaying their original principal balances many times over during the course of repayment due to interest that accrues during school, during other deferments and forbearances, and sometimes in income-driven repayment plans when monthly payments may be relatively low. Putting a cap on interest accrual would stop runaway balance increases, providing borrowers with an easier path to fair repayment.
Student Loan Forgiveness and Cancellation
Some consumer advocates argue that student loan interest and repayment reforms wouldn’t go far enough to address the student debt crisis. We are already seeing more radical ideas – such as the cancellation of student debt to stimulate the economy – entering mainstream political discussion. While I think it’s rather unlikely that a proposal to instantly wipe out $1.5 trillion in student debt could become law absent a fundamental shift in public opinion, we could certainly see a shoring up or expansion of existing student loan forgiveness programs (such as Public Service Loan Forgiveness) and the creation of new student loan forgiveness programs that provide many new alternate paths to loan cancellation.
Bankruptcy Reform
One of the biggest roadblocks for struggling student loan borrowers is the fact that the bankruptcy code makes it extremely difficult for most people to discharge their student loans in bankruptcy. Advocates are calling for reforms to reinstate the ability of borrowers to discharge their student debt in bankruptcy, just like any other type of consumer debt.
Skeptics worry that if such reform was enacted, student debtors and recent graduates would flood the bankruptcy courts with petitions to discharge their student loans. However, advocates note that bankruptcy carries a lot of negative consequences – including social stigma and lasting credit damage – that would dissuade many people from immediately going the bankruptcy route. Others argue that there could be additional anti-fraud measures that accompany any bankruptcy reforms, such as a post-graduation waiting period before borrowers can apply for a student loan bankruptcy discharge (which is, incidentally, how the bankruptcy code used to address student debt).
Stronger Oversight
There is near-universal agreement that the current student loan system – which consists of a patchwork of government entities and private third-party servicers and debt collectors – is an unwieldy mess. The system is plagued by poor oversight and little accountability. Meanwhile, colleges and universities have little “skin in the game,” and thus they have minimal incentives to make sure their graduates get employed and can pay back their debts.
Watch for reforms that rein in student loan servicers and debt collectors via a national Student Loan Bill of Rights – modeled on bills currently pending in states like New York and Massachusetts. In addition, look for oversight initiatives that target colleges and universities (and in particular, for-profit schools) and tie graduation and employment outcomes to accreditation and access to federal financial aid programs.
The Trump administration has plans to cancel the student loan forgiveness plan in the 2020 budget. This means you need to apply while you still can! Call Student Education Center at 1-833-393-9455 today!
Source: https://www.forbes.com/sites/adamminsky/2019/03/11/6-bold-student-loan-reforms-to-watch-for-in-2019/#393e815148a6
Now more than ever, I anticipate that student loan debt – which currently tops $1.5 trillion – will be one of the biggest issues discussed on the campaign trail. After all, over 40 million Americans have student loans. Candidates will need to craft bold policy proposals to differentiate themselves and make them stand out to voters. And if even some of these policy ideas get turned into actual legislation, they could transform the student debt landscape and our entire system of financing education. Here are some bold ideas to watch for during the next year and a half.
Debt-Free College
There are already multiple proposals to reduce or eliminate college tuition at public universities, or at the very least, get rid debt-financed college degrees. House Democrats have already proposed the Aim Higher Act, which would increase grant-based federal aid and provide federal financial incentives to states to eliminate or reduce tuition at state universities. Some states have already gotten ahead of the curve to implement debt-free college programs. New York, for example, has proposed free tuition at state colleges for students from lower-income families who commit to remaining in New York after graduation.
Refinancing Programs
Addressing the ongoing increase in student debt by steering students away from debt-financed degrees will be an important component of any student loan reform policy. But lawmakers will still have to address the $1.5 trillion in student loan debt that already exists. One idea to help borrowers contain the cost of student loan repayment would be a federal program that allows them to refinance their student loans – both federal loans and, potentially, private loans – at much lower interest rates. Senator Elizabeth Warren (who is running for president) proposed such a bill back in 2014, although it did not pass.
Supporters say this could drastically reduce the cost of student loan repayment. Detractors, however, argue that this would disproportionately benefit higher-income earners, since student loans made to parents and graduate students tend to have higher interest rates than undergraduate student loans, and these people tend to make more money, too.
Caps On Interest Accrual
Reducing interest rates would be one way to lower the cost of student loan repayment. Another option would be to cap the amount of interest that can accrue on a student loan – perhaps at a percentage of the original principal balance. It’s not uncommon for student loan borrowers to wind up repaying their original principal balances many times over during the course of repayment due to interest that accrues during school, during other deferments and forbearances, and sometimes in income-driven repayment plans when monthly payments may be relatively low. Putting a cap on interest accrual would stop runaway balance increases, providing borrowers with an easier path to fair repayment.
Student Loan Forgiveness and Cancellation
Some consumer advocates argue that student loan interest and repayment reforms wouldn’t go far enough to address the student debt crisis. We are already seeing more radical ideas – such as the cancellation of student debt to stimulate the economy – entering mainstream political discussion. While I think it’s rather unlikely that a proposal to instantly wipe out $1.5 trillion in student debt could become law absent a fundamental shift in public opinion, we could certainly see a shoring up or expansion of existing student loan forgiveness programs (such as Public Service Loan Forgiveness) and the creation of new student loan forgiveness programs that provide many new alternate paths to loan cancellation.
Bankruptcy Reform
One of the biggest roadblocks for struggling student loan borrowers is the fact that the bankruptcy code makes it extremely difficult for most people to discharge their student loans in bankruptcy. Advocates are calling for reforms to reinstate the ability of borrowers to discharge their student debt in bankruptcy, just like any other type of consumer debt.
Skeptics worry that if such reform was enacted, student debtors and recent graduates would flood the bankruptcy courts with petitions to discharge their student loans. However, advocates note that bankruptcy carries a lot of negative consequences – including social stigma and lasting credit damage – that would dissuade many people from immediately going the bankruptcy route. Others argue that there could be additional anti-fraud measures that accompany any bankruptcy reforms, such as a post-graduation waiting period before borrowers can apply for a student loan bankruptcy discharge (which is, incidentally, how the bankruptcy code used to address student debt).
Stronger Oversight
There is near-universal agreement that the current student loan system – which consists of a patchwork of government entities and private third-party servicers and debt collectors – is an unwieldy mess. The system is plagued by poor oversight and little accountability. Meanwhile, colleges and universities have little “skin in the game,” and thus they have minimal incentives to make sure their graduates get employed and can pay back their debts.
Watch for reforms that rein in student loan servicers and debt collectors via a national Student Loan Bill of Rights – modeled on bills currently pending in states like New York and Massachusetts. In addition, look for oversight initiatives that target colleges and universities (and in particular, for-profit schools) and tie graduation and employment outcomes to accreditation and access to federal financial aid programs.
The Trump administration has plans to cancel the student loan forgiveness plan in the 2020 budget. This means you need to apply while you still can! Call Student Education Center at 1-833-393-9455 today!
Source: https://www.forbes.com/sites/adamminsky/2019/03/11/6-bold-student-loan-reforms-to-watch-for-in-2019/#393e815148a6
6 Bold Student Loan Reforms To Watch For In 2019
Reviewed by Student Loans Center
on
March 02, 2020
Rating:
Reviewed by Student Loans Center
on
March 02, 2020
Rating:
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