Madam Speaker, today, I am introducing of the Income- Dependent Education Assistance (IDEA) Act of 2007. This legislation would provide a new consolidation option for federal Stafford student loan borrowers with an improved repayment…
Madam Speaker, today, I am introducing of the Income- Dependent Education Assistance (IDEA) Act of 2007. This legislation would provide a new consolidation option for federal Stafford student loan borrowers with an improved repayment schedule through direct IRS collection of payments, along with other new protections for borrowers and taxpayers.
I believe that the IDEA Act will address the oft-overlooked side of federal student loan assistance: repayment. For over four decades, most of the discussion regarding federal student loans has primarily focused on making ever-increasing amounts of money available to students to keep up with the rising costs of college tuition.
However, providing students with larger loans to attend college leads to another, more complex challenge after graduation. How should students be expected to repay these taxpayerfunded loans? This is an area that has received relatively little attention until recently. With students graduating with ever-increasing debt loads, averaging over $18,000 this year and projected to continue to rise, students are finding it increasingly difficult to make loan payments on time and in full.
Unfortunately, little has been done by way of providing more flexible repayment options for borrowers after graduation. Traditionally it has been expected that the borrower will pay the amortized loan over a standard period, usually 10 years, with the same repayment amount on day one as on the last day. However, this model of repayment fails to take into account that students often face periods of significant unemployment or underemployment during the first years after leaving college.
As of now, for the most part, the only options available to borrowers are to request a period of forbearance or slip into default, which is bad for both borrower and taxpayers. We simply cannot keep providing more and more money for education if graduates then enter the workforce saddled with payments they can't afford.
While there have been some attempts to provide more diverse repayment options, such as the income-contingent loan repayment program available through Direct Lending that has been in existence for over a decade, borrowers have failed to adopt them, usually due to a lack of information or current program limitations. The bottom line is that Congress needs to develop better repayment alternatives for federal student loan borrowers, especially as students continue to take out larger and larger loans in coming years.
I believe the IDEA Act does just that. This legislation would allow any Stafford loan borrower the ability to consolidate into a direct IDEA loan with a repayment schedule that corresponds to the borrower's income once in repayment. This new schedule requires regular payments; however, it ensures that such payments reflect the borrowers' capacity to repay under their current income status. This feature would be particularly useful for those pursuing lower-income, public-service careers. It also would help relieve some of the stress that borrowers face during periods of unemployment or underemployment following graduation.
Another critical component of this legislation is the direct collection of payments from the borrower through IRS withholdings. By incorporating the IRS directly as the collection entity, the borrower's income is automatically calculated into the repayment system and reduces the odds of fraud or abuse on the part of the borrower or the collection agency. Furthermore, direct IRS collection would simplify the process for borrowers and reduce their paperwork burden as the agency would already have the necessary information on file and in place for processing the payment amounts and schedules. Finally, the IDEA Act stipulates that borrowers that go into default and have exhausted all relief from the loan holder would automatically be consolidated into IDEA loans in order to help them get their payments back on track and avoid costly defaults. Thus the taxpayers' investment will be protected from the damaging effects of borrower default, which currently affects 5.1 percent of federal student loans each year.
Madam Speaker, the IDEA Act is an innovative solution to the growing problem of unmanageable debt loads for students. Students would be able to borrow what they need, up to the current Stafford limits, and later consolidate into IDEA loans knowing that their repayment amounts will be within their income levels and ability to pay. On the other hand, taxpayers can count on those loans being repaid as they are collected through the IRS. This is a responsible approach to a serious and growing problem for student loan borrowers.