Student-loan payment may soon come directly out of your paycheck
Your student loans could be automatically deducted from your paycheck each month if a new proposal from Republican Sen. Lamar Alexander becomes law.
In a speech that he delivered earlier this month, Alexander, R-Tenn., laid out a broad blueprint to completely overhaul the system for financial aid and student loan repayments -- a plan that, if approved, could ultimately affect up to 40 million borrowers, who owe a collective $1.5 trillion in student loan debt.
Alexander, who chairs the Health, Education, Labor and Pensions Committee, proposed a repayment plan based on a borrower’s income. It would never require the borrower to make payments of more than 10 percent on their income, he said.
“And it makes sure if there were no money earned, there would be no money owed,” Alexander said. “And that would not reflect negatively on a borrower’s credit.”
The 78-year-old senator also proposed a 10-year payment plan, with equal monthly payments (similar, he said, to a 10-year mortgage).
Alexander also suggested the creation of an accountability system that would be based upon whether borrowers were repaying their student loans or not. It’s unclear exactly what the accountability program would be, but he said it should lower the cost of tuition for some programs, while discouraging schools from offering programs “that are not worth it to students.”
“All three of these proposals should help students afford college and make sure that the degree they earn is worth the time and money they pay for it,” he said.
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In the second quarter of 2018, student loan debt in the U.S. has climbed to a staggering $1.53 trillion -- a burden that’s largely being borne by millennials. Federal Reserve Chair Jerome Powell has previously warned that burgeoning student loan debt could derail an otherwise-flourishing economy by hindering people’s “economic life” and hurting their credit ratings.