Congress is poised to make big changes to the government programs tapped by millions of students to pay for college. The biggest of these for students: a cap on what low-income borrowers have to pay back each month on their federal student loans.
Measures passed by the House last week — and one by the House earlier this month — come in response to growing concerns about student debt. About two in three recent college graduates have loan debt, and over the past decade, the average amount has grown 50 percent faster than inflation.
Meanwhile, just over the last two years interest rates have risen enough to more than double the total interest some borrowers will eventually have to repay on their loans.
But the moves in Congress also reflect a more nuanced picture of student borrowing. The median debt for students pursuing a bachelor’s degree is about $20,000. That’s a lot, but it’s a level experts consider manageable for most students, considering how much more college graduates eventually earn.
The real concern is the growing number of students piling up significantly higher debts than the average. That trend has an indirect cost even for nonborrowers: Discouraged by high monthly payments, talented people decide not to pursue careers in relatively low-paying but critical public service jobs like teaching.
There are also scattered programs of outright loan forgiveness, targeting groups such as teachers and child-care providers in low-income communities.
Now, the Democrat-controlled Congress is on the verge of significantly expanding the number of student borrowers who could get a break. Congress has endorsed expanding loan repayment to anyone under an income threshold, not just those who borrowed under the government’s direct lending program. The change would expand the option to participants in the full range of federal loan programs, including about 10 million undergraduates with Stafford loans.
While details of the House and Senate bills need to be reconciled, both envision capping monthly payments at what students can afford. Repayment wouldn’t be required until borrowers are earning 150 percent of the poverty line and would be capped at 15 percent of income beyond that.
Other provisions expand loan forgiveness options for public service careers and forgive loans entirely after 20 or 25 years of repayment. Republicans and President Bush have opposed aspects of the aid reforms, but overall they do not appear to have focused on the loan repayment provisions.
“The principle here is, if you go to college and take out a reasonable amount of federal loans, you should be able to pursue your goals and career and life without having that debt drive your actions,” said Luke Swarthout, of the group U.S. PIRG, which lobbies for student aid.