Proposed Student Loan Legislation Would Deduct Loan Payments from Debtors' Paychecks

Student loan debt in this country is now north of $1 trillion. As we have reported many times (go, for instance, here and here), a lot of student loan debtors are behind on their payments. A large percentage of this debt -- and over 90% of new loans -- is owed to the federal government.

So, as explained here, Representative Tom Petri (R-Wis.) wants the Department of Education and the IRS to take loan repayments straight out of debtors' paychecks:

Congress will consider overhauling debt collection in the $100 billion-a-year U.S. student loan program, replacing it with automatic withdrawals from borrowers’ paychecks tied to their income -- a system used in the U.K. Legislation that Wisconsin Republican Representative Tom Petri plans to introduce as soon as this week would require employers to withhold payments from wages in the same way they do taxes. Payments would be capped at 15 percent of borrowers’ income after basic living expenses. * * * The plan would resemble those in the U.K., Australia, and New Zealand. Since the money would be withdrawn automatically and tied to income, borrowers would no longer have to negotiate with collectors and loan-servicing companies, which often offer a confusing array of deferral and forbearance options after a job loss or illness. The Education Department would manage the withdrawals, with help from the Internal Revenue Service.

 

Comments

[Cornholio]

What do they consider 'basic living expenses'? And is this 15% on the Gross, or is it what is left over after this same government hits the check of income taxes, Socialistic Insecurity? This appears to be vague, and that is no accident, most likely. Let's see, 15% of a a typical job anymore in America (about 8.00 an hr, 20 hrs a week, about 160.00) is about 34.00. How many eons is it going to take to pay back thousands of dollars? And, most likely, Interest will be accruing during this period.
What a joke this is. Since most do not look beyond the Headlines, they will think this is a nifty idea.

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[Vanderburg Moe]

Education is very important to all children. And I must say that this Student Loan is a great help. It should last so that many students can finish their studies.

[Trueman Janssen]

I think there is a need to revisit some of the guidelines in this students' loans. They must study more options on how to make these loans easier for the students to pay.

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[Pettie Underhill]

I am also a product of this student loan. Without this, I will never reach the position that I have now. This is a beneficial program especially those parents who cannot able to raise their child to school because of financial stability. This is truly an applauding program.