Tuesday December 25, 2012, 9:11 pm

Will These 5 Solutions Really Solve the College Debt Crisis?
Many student loan bills get squashed right out of the gate. Will one of these ideas break through?
By Suzi Parker
December 18, 2012
Comment
Will These 5 Solutions Really Solve the College Debt Crisis?
Do you think student loan debt should be forgiven? (Photo: Getty Images)

When the 113th Congress convenes in January, the student loan crisis could be front and center.

Wisconsin Republican Representative Tom Petri introduced the Earnings Contingent Education Loans (ExCEL) Act of 2012 on December 17th. That bill would simplify and improve student loans for borrowers while saving significant taxpayer dollars.

“If you are earning a higher income after leaving school, you would repay your loan more quickly, although with no more than 15 percent of your income beyond an allowance for basic living expenses,” Petri said in a statement. “If you lose your job, get sick, or can't find a good job, your loan payments would automatically be kept at affordable levels.”

Petri said that students would not face interest spiraling to unmanageable levels if they are unemployed temporarily. It protects borrows from financial ruin and taxpayers who have to cover default loans.

More: 8 Ways to Keep Your Student Loan Debt From Crushing You
Take Action! Join 1.1 Million People in Supporting the Student Loan Forgiveness Act

Employers would be charged with withholding payments from wages in the same way they do federal and state taxes. Payments would be capped at 15 percent of borrowers’ income after basic living expenses, and borrowers would pay a percentage of their income until the loan is repaid.

It’s a system that has worked successfully in the United Kingdom, Australia and New Zealand, where defaults seldom occur.

Since 2003, total student loan debt has increased every quarter. The Obama Administration has marked the trillion-dollar student loan crisis as one of the most serious financial issues facing this country. In July, he signed a bill that kept interest rates on federal student loans from doubling in 2012. Without that bill, nearly 7.5 million students would have had to pay $1,000 more on their loan payments.

Currently, there are several bills that deal with student loans in Congress.

New York Rep. Steve Israel, a Democrat, introduced a bill earlier this year to amend the Internal Revenue Code of 1986 to exclude from gross income amounts paid by an employer on an employee's student loan. So far, little action has occurred on it.

Rep. Hanson Clarke, a Democrat from Michigan, also introduced the Student Loan Forgiveness Act of 2012. In a fact sheet about the act, it notes:

If you make payments equal to 10% of your discretionary income for 10 years, your remaining federal student loan debt would be forgiven.
If you have already been making payments on your student loans, your repayment period would likely be shorter than 10 years. The amount you have already paid on your student loans over the past decade would be credited toward meeting the requirement for forgiveness.

The last major action on Clarke’s bill occurred in late March when it was referred to the Subcommittee on Higher Education and Workforce Training.

Tuesday December 25, 2012, 10:15 pm
We definitely need a way to deal with student loans. I'm not sure about elsewhere, but here in Canada, student loans are the one thing that cannot be discharged after declaring bankruptcy.

Tuesday December 25, 2012, 10:22 pm
In the US there are also other debts that cannot be discharged that way in addition to student loans--and in at least some circumstances death with no estate doesn't discharge but passes to next of kin.

Wednesday December 26, 2012, 10:44 am
Thanks J.L. for the post and of all of the solutions presented I like Rep. Hanson Clarke's the best. Read and noted.

Wednesday December 26, 2012, 10:53 am
I do, too, John. You cannot currently send a star to John because you have done so within the last week.

Wednesday December 26, 2012, 11:28 am
Stop giving loans to for-profit schools that don't train people for jobs. Fund open enrollment community colleges by the school, not by loaning to students.

Wednesday December 26, 2012, 3:11 pm
If a person's only income is from Social Security, Social Security Disability, or Supplemental Security Income, then his or her student loans should be forgiven.

Wednesday December 26, 2012, 7:14 pm
Excellent ideas Donna. You cannot currently send a star to Anne because you have done so within the last week.

Wednesday December 26, 2012, 11:40 pm
thanks.

Thursday December 27, 2012, 12:11 pm
Noted

Thursday December 27, 2012, 9:02 pm
You are welcome Rene.