Plan to revamp student-loan payments is solid


The cost of a college education has gotten so high that borrowing to pay tuition and other costs has now surpassed credit-card debt in America. There is now over $1 trillion in outstanding student loan debt.

This mountain of debt is so heavy for some people they don’t keep up on payments, forcing the lender — the U.S. government — to hire debt collection companies that charge up to 25 percent of the borrowers’ loan balance.

This is a lousy — and expensive — way to handle this sad situation.

U.S. Rep. Tom Petri, R-Wis., is pitching a fix that should make life easier for those buried in student loans while ensuring taxpayers are repaid.

Under Petri’s plan, employers would be required to withhold student loan payments from wages similar to the way taxes are withheld. The payments would be capped at 15 percent of income after basic living expenses.

“This doesn’t mean leaving taxpayers on the hook if a student borrows too much — everyone would still pay back what they borrow under this system,” Petri said. “It does mean providing much stronger protections against the kind of financial ruin that is all too prevalent in our current system.”

Putting this plan into effect will likely take some time and adjustments will have to be made as calculations are done to account for living expenses. The amount deducted must be high enough to pay off the loan at some point while not creating a financial burden for the borrower.

Great Britain, Australia and New Zealand already have similar plans in place so this is not uncharted territory. The system is said to be working well.

According to Bloomberg News, 5 million U.S. student-loan borrowers were in default on $67 billion in loans, twice the amount less than a decade ago. Last year, debt-collection companies hired by government agencies received about $1 billion in commissions, Bloomberg reported. In addition, these companies have come under fire for heavy-handed ways and demanding high payments even when borrowers qualify for income-based repayment.

But under the new system, based on the experience in the United Kingdom, 98 percent of borrowers should be able to meet their loan payments through automatic payroll withholding, according to information provided by Petri’s office.

Although the term “win-win” has now become cliche, it seems to be appropriate here. Congress should act quickly on Petri’s proposal so borrowers and the taxpayers will start seeing the benefits.


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