Simpler Isn’t Always Better for Student Loan Borrowers
This post originally appeared on www.younginvincibles.org
By: Tom Allison | March 26, 2018
It’s been ten years since Congress updated the Higher Education Act (HEA). A lot has changed in the last decade, including the options available to borrowers to repay their loans. A lot of those changes happened at the administrative level, but this year Congress has started talking about HEA reauthorization. We have a real opportunity to make those repayment plans simpler and more friendly to borrowers.
Earlier this year, Young Invincibles submitted comprehensive comments to the Senate HELP Committee recommending how to re-authorize HEA, and late last year, the House Education & Workforce Committee approved their version of reauthorization, entitled the Promoting Real Opportunity, Success, and Prosperity Through Education Reform (PROSPER) Act. That bill would make many changes to our higher ed system, including streamlining the various federal loan programs with the ONE loan program.
Borrowers would have two options to pay back that loan: the 10-year amortization plan, which borrowers are currently automatically entered into, and a new income-driven plan. Depending on how you count them, today’s borrowers have to choose between eight different repayment plans, which is too many. So we support simplifying the options. But how does this one option compare to current, more borrower-friendly options, like Pay As You Earn?
Our analysis finds that the repayment plan described in the PROSPER Act would cost the typical borrower nearly $15,000 more to repay their loans than under current law.
Posted on 27 March 2018
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