October 12, 2018

Cortez Masto, Senators Introduce Legislation to Ensure Affordable Student Loans for Every Borrower

Washington, D.C. – U.S. Senator Catherine Cortez Masto (D-Nev.) joined Senator Jeff Merkley (D-Ore.) in introducing the Affordable Loans for Any Student Act of 2018, comprehensive legislation that would ensure affordable, simple income-based repayment plans for any federal student loan borrowers.

The average college senior who has taken out loans now graduates with more than $30,000 in debt, and total student debt nationwide has topped $1.5 trillion, creating a significant drag on the economy. Many borrowers would benefit from a simple repayment plan based on their income, with a clear light at the end of the tunnel. Currently, however, there are at least five income-based repayment plans and dozens of confusing iterations. As a result, far too many borrowers fail to discover or successfully maintain income-based repayment until it’s too late. The Affordable Loans for Any Student Act would overhaul and fix this dysfunctional system, streamlining existing programs and creating just two simple and easy-to-understand options for borrowers to choose from and avoid loan delinquency or default.

“Americans should not have put off purchasing a home or starting a family because they’re saddled with thousands of dollars in student loan debt,” said Cortez Masto. “This legislation provides student loan borrowers with straightforward options to repay their loans in a reasonable period of time and without unnecessary fees. It will begin to lift the $1.5 trillion dollar burden of student loan debt off Americans’ shoulders, put more money back in the pockets of families, and strengthen our economy.”

“Higher education should create a path to opportunity, not a millstone of debt hanging around young Americans’ necks,” said Merkley. “Right now, our student debt crisis is holding our whole nation back. Many young Americans are putting off buying houses, starting businesses, or even starting a family because of their student loan burden. It’s bad for our communities and terrible for our economy. Isn’t it time we had a simple, easy-to-use repayment system that ensured every student has an affordable loan option?”

The Affordable Loans for Any Student Act of 2018 would overhaul the confusing system of income-based repayment plans to give borrowers a simple choice between two plans:

  • A Fixed Repayment Plan with equal monthly payments sufficient to repay the loan and any accrued interest over a period of 10 years; or
  • An Income-Based Repayment (IBR) Plan in which a borrower pays 10 percent of their income above a poverty level, capped at 20 years of payments.

In addition to streamlining repayment plans for borrowers, the bill:

  • Ends interest capitalization and origination fees on all loans, which can add thousands of dollars to a borrower’s total payments over the life of the loan.
  • Targets assistance to struggling and low-income borrowers.
  • Allows for automatic recertification of income for IBR plans.
  • Limits aggressive federal debt collection amounts that are obtained through wage garnishment or tax offset to no more than the amount the borrower would pay under IBR.
  • Replaces the current deferment and forbearance options into one, streamlined “pause payment” process that does not capitalize interest.
  • Provides relief to severely delinquent borrowers and those who rehabilitate their loans by automatically enrolling them into the IBR plan.
  • Changes the use of the confusing term “master promissory note” to “student loan contract” to improve consumer understanding of the purpose of the document.
  • Improves other loan disclosures and interactive counseling.

This legislation is officially endorsed by The Institute for College Access & Success (TICAS), Higher Education Loan Coalition, Young Invincibles, Association of Community College Trustees (ACCT), American Association of Community Colleges (AACC), and the National Consumer Law Center (on behalf of its low-income clients).

Full text of the bill is available here, and a one-page summary of the Affordable Loans for Every Student Act is available here.