Rep. Peters Intros Bill to Lower Burden of Student Loan Repayment
Bill endorsed by Student Debt Crisis
WASHINGTON, D.C. – Today, Congressman Scott Peters (CA-52) introduced the “Student Loan Repayment Assistance Act of 2014,” legislation to make college more affordable by helping students pay off outstanding loan debt more quickly.
“Affordable higher education for every American has been central to our nation’s competitiveness and success,” Rep. Peters said. “I would not have been able to attend college without student loans and work study programs. This is a time to be making it easier and more affordable for students to go to college, not keeping it financially out of reach for more and more families.”
“My legislation will help speed up the repayment process and lower the burden on students and families. It will increase purchasing power of young people and encourage more students to make the investment in their education that our country needs.”
The “Student Loan Repayment Assistance Act” is just a piece of Rep. Peters’ ongoing work to reduce the burden of student loans on American families. Earlier this year he introduced the bicameral “Federal Student Loan Refinancing Act” with Rep. Mark Pocan (WI-02) and Senator Kirsten Gillibrand (D-NY). He was also vocal in the successful effort to stop federal student loan interest rates from doubling last summer.
Background on the “Student Loan Repayment Assistance Act”
What it does:
- Extends the deferred payment period from 6 months to 12 months when the national unemployment rate rises above the natural rate of unemployment as targeted by the Federal Reserve
- Creates an above the line deduction for student loan payments made as part of a repayment agreement between an employer and employee
How it works:
- An employer enters into an agreement with an employee to assist him or her with student loan repayment up to $6,000 per year with a lifetime cap of $50,000 per individual
- Like a 401K plan, the employee determines how much he or she would like to pay toward their student loans on a monthly basis and the employer determines the rate at which they will assist
- Employee and employer contributions to student loan repayments are not subject to either income tax or payroll tax
- The total employer and employee contributions would go directly to the loan holder on a monthly basis
How it affects repayment time:
In 2012, according to the Institute for College Access & Success, the average student loan debt was $29,400 for a 4 year undergraduate degree, with an interest rate of 3.4%. Assuming the standard 10-year repayment plan for a Stafford loan, the average annual payment would be $3,507. Using that data, below is a graph that demonstrates how this bill would decrease the time it takes for a graduate to pay off their student loan burden.