Will Reauthorizing The Higher Education Act Provide The Relief You Need?

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Tom Harkin

Senator Harkin is looking to reauthorize sooner rather than later. Will he (and borrowers) get that wish?

Late last month, Senator Tom Harkin said he wanted legislation to reauthorize the Higher Education Act (HEA) by June. That timing may not happen; however, members of Congress are currently proposing bills in anticipation of reauthorization.

When reauthorization does occur, that could mean big changes for student loan borrowers—especially if two bills I’d like to see passed get approved in some fashion.

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A Little Background

Initially passed in 1965, the HEA provides funding and resources for federal initiatives related to higher education. Congress is required to renew this law periodically, and this reauthorization gives them an opportunity to check in about student loan troubles, which have gained attention since the last reauthorization in 2008.

Now, both sides of the aisle appear ready to address a number of these issues. Too many legislative options have been proposed to detail here. Each has its pros and cons, but these two offer positives that I feel could really help borrowers.

1. Earnings Contingent Education Loans (ExCEL) Act

Introduced by Tom Petri (R-Wis.) and Jared Polis (D-Colo.) last year, this bill simplifies repayment of federal student loans in two main ways:

  • Anchors the repayment of student loans to 5%-10% of an employee’s starting salary.
  • Allows payments to come straight from your paycheck, similar to contributions to Social Security, payroll taxes, insurance costs, and 401(k) investments.

Why I like it: With automated payments, this bill could eliminate an enormous administrative burden. Potentially, borrowers may no longer need loan consolidation, face debt collectors, or have to submit forbearance/deferment requests (if facing temporary economic hardship). I would love to see someone crunch the numbers on savings.

2. Student Loan Borrowers’ Bill of Rights

This comprehensive piece of legislation introduced a few weeks ago by Congresswoman Frederica Wilson (D-Fla.) addresses some of the most obvious problems associated with repaying student loans today by doing the following:

  • Restoring bankruptcy protection for both federal and private student loans.
  • Reinstating the statute of limitations on the collection of student debt.
  • Prohibiting the suspension of professional licenses for borrowers with defaulted student loans, as well as automatic wage, Social Security and tax return garnishment.
  • Cutting in half the time students currently enrolled in the Public Service Loan Forgiveness program need to achieve loan forgiveness (from 10 to 5 years).

Why I like it: By restoring many of their consumer rights, this bill could make sense for and serve as a rallying point from private and federal student loan holders. To that end, there is an active petition for this bill that has almost 70,000 signatures as of this writing.

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Congress proved in 2008 that reauthorization can be a useful tool to improve the way we fund and repay higher education obligations.

That year, it allowed any disabled person who meets the “substantial gainful activity test”—the same standard used by the Social Security Administration to determine Social Security Disability Insurance—to discharge their federal student loans due to total and permanent disability. These rules have changed since 2008, but this still shows how reauthorization can motivate structural change.

When the next reauthorization does occur, this author would like to see even greater change, thanks to a combination of the two bills above.

This blog represents the thoughts of the contributor only; SALT™ does not endorse any legislation described here.

What reform would you like to see? Tell us in the comments!

(Photo: thisisbossi)

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