Burr, King Introduce Student Loan Repayment Reform

WASHINGTON, D.C. – Today, U.S. Senators Richard Burr (R-N.C.) and Angus King (I-Maine) introduced legislation to reform federal student loan repayment programs. Current graduates face a maze of federal student loan repayment programs from which to choose that often leave students confused about which program best fits their needs. In addition, years of ad hoc changes and expansions have done little to ensure taxpayers are likewise best served. The Repay Act, which mirrors a discussion draft released by Senators Burr and King earlier this year, addresses these issues by consolidating many of the benefits of current repayment programs into two plans: a fixed repayment plan, based on a 10-year period, and a single, simplified income-driven repayment option.  

“North Carolinians are tired of seeing their hard-earned tax dollars go to waste in a student loan program that serves neither their interests nor those of the college students it is intended to help,” said Senator Burr.  “The Repay Act has two very simple goals: First, students should be presented with clear options on how to repay their student loan debts affordably and in a straightforward manner.  Second, taxpayers should no longer subsidize the excessive borrowing and loan forgiveness that Washington has allowed to take place over the past few years.  Although more can be done to address the deficiencies in our student loan programs, the Repay Act is a responsible step in the right direction toward better fiscal management of our loan programs that allows students to make well-informed decisions about borrowing for college.  I look forward to advocating for the Repay Act’s inclusion in Higher Education Act as Congress continues to debate its reauthorization.”

“Getting a handle on college debt after graduation is already hard enough without the red tape and maze of student loan repayments that come with it. Not only are students left with confusing repayment options, but if they default on them, then the American taxpayer is stuck footing the bill,” Senator King said. “Both deserve better. This bipartisan proposal dramatically simplifies loan repayment by consolidating many of the benefits of the existing plans, making it easier for students to decide which option best fits their needs and lowering the chance that borrowers will fall behind on their payments. It’s a win for both students and taxpayers.”

The Repay Act makes loan repayment more affordable for the middle class by eliminating duplicative repayment options, streamlining eligibility terms, and ensuring that borrowers will never direct more than 15 percent of their discretionary income to their loan payments. The proposal also ends the disproportionate federal subsidization of loan payments for high income borrowers and sets parameters for the amount of debt that can be forgiven over certain periods of time.  These are commonsense changes supported by broad groups of stakeholders who want to see these programs become sustainable and user-friendly. This legislation is estimated to save taxpayers hundreds of millions of dollars over the next decade.

The senators also penned an opinion piece explaining their proposal, which was published in the Portland Press Herald today. It is available online HERE.


Section 1 – The Repay Act

Section 2 – Creates a new Simplified Income-Driven Repayment (SIDR) plan that—

·         Streamlines loan term and forgiveness schedule:

o   For borrowers with loan balances up to the maximum undergraduate limit prior to repayment, currently $57,500, 20 years of repayment before loan forgiveness;

o    For borrowers with loan balances over the $57,500 undergraduate borrowing limit prior to repayment, 25 years of repayment prior to loan forgiveness.

·         Creates a simple monthly calculation rate that ensures borrowers never pay more than 15% of their monthly discretionary income through the life of repayment;

·         Requires borrowers to make SIDR payments in order to be eligible for forgiveness; and

·         Calculates loan payments for households based upon household income.

Section 3 – Provides for a new set of simplified repayment options, as created by the King/Burr draft, that take effect July 1, 2015. This provision requires the Secretary of Education to make clear to graduates they have the option of a standard repayment option that fully amortizes their loan balances (as provided under current law) or a Simplified Income-Driven Repayment option that caps payments at a percentage of their income and provides the option of loan balance forgiveness after 20 or 25 years (or 10 years, if eligible for Public Service Loan Forgiveness).

Section 4 – Renames the existing ten-year “standard repayment plan” the “fixed repayment plan

·         Retains all other applicable terms and conditions of the existing ten-year repayment plan.

Section 5 – Tax Provisions

·         Under section 437(a) of the Higher Education Act, individuals exhibiting total and permanent disabilities, defined as likely leading to death and/or complete unemployment, are eligible for student loan forgiveness. With that, however, comes the expectation of tax liability for the amount forgiven, leading to large tax bills for these disadvantaged individuals. The Repay Act would provide complete tax forgiveness for individuals exercising the Total Permanent Disability (TPD) discharge of their student loans.

Section 6 – Instructs the Secretary of Education to direct federal student loan servicers to notify borrowers about the repayment plans available to them, outline the financial impact of switching to alternative repayment plans, and offer to enroll individuals in such plans, if eligible.

To read more about the Repay Act, click HERE, and to see the full legislative text, click HERE.