Oregon Senator seeks college debt reform

Sen. Jeff Merkley introduces legislation that would tie debt payments to income.

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Sen. Jeff Merkley introduced legislation Wednesday that would tie student-debt payments to income.

He included a provision that protects students from being burdened by taxes after they repay their loans.

Merkley said in a news release: “As the first in my family to go to college, I know how daunting the idea of taking on tens of thousands of dollars in debt is to students of modest means. I still live in the blue collar neighborhood I grew up in, and I hear all the time from parents who fear that sending their kids to college will leave them trapped between large debt payments and small paychecks upon graduation. We need to take that fear out of the equation and ensure that all students can attend college with confidence that they will be able to afford their student loan payments.”

The AFFORD Act would streamline the array of income-based repayment plans currently available with two options: either a fixed payment plan (the same payment each month) or an agreement to pay 10 percent of discretionary income each month until the loan is paid off or until the 20 years are up. (Discretionary income is defined in the bill as any income above 150 percent of the poverty line.) After that — through a tandem bill the senator also introduced Aug. 5, the Income-Based Repayment Debt Forgiveness Act — the remainder of the federal loan would be forgiven.

The AFFORD Act would also cap the lifetime interest the loan can accrue to 50 percent of its original balance. The bill now goes to the Senate Health, Education, Labor and Pensions Committee. Oregon’s other senator, Democrat Ron Wyden, has also signed on, but it may face significant opposition in the Republican-controlled Congress.

(SOURCE: Portland Tribune)

The senator made a detailed summary of the AFFORD Act available for download here.

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