Senator to students: Pay back what you can afford

With the rising cost of higher education and crushing student loan debt in the headlines, U.S. Senator Jeff Merkley wants to make permanent a program that ties student loan payments to just 10 percent of their discretionary income. After 20 years, any remaining debt would be forgiven.

Merkley (D-Oregon) introduced the Access to Fair Financial Options for Repaying Debt (AFFORD) Act in the senate Wednesday, Aug. 5, in Washington, D.C. It is patterned off an Obama Administration program that was expanded in early June. All students, not just those struggling with debt repayment, are now eligible for the Pay As You Earn (PAYE) program.

A spokeswoman for the senator explained that a legislative fix would last beyond the current presidential administration. Martina McLennan also said the senator’s bill is focused on educating families of this option early on.

“One of the key ideas behind this bill is to eliminate the fear that students have of going to college when they’re unsure if they’ll be able to afford the debt they take on,” McLennan said.

The AFFORD Act would streamline the array of income-based repayment plans currently available with two options: either a fixed payment plan (the same payment each month) or an agreement to pay 10 percent of discretionary income each month until the loan is paid off or until the 20 years are up. (Discretionary income is defined in the bill as any income above 150 percent of the poverty line.) After that — through a tandem bill the senator also introduced Aug. 5, the Income-Based Repayment Debt Forgiveness Act — the remainder of the federal loan would be forgiven.

“I still live in the blue collar neighborhood I grew up in, and I hear all the time from parents who fear that sending their kids to college will leave them trapped between large debt payments and small paychecks upon graduation,” said Merkley, who graduated from David Douglas High School in East Portland, in a news release. “We need to take that fear out of the equation and ensure that all students can attend college with confidence that they will be able to afford their student loan payments.”

The AFFORD Act would also cap the lifetime interest the loan can accrue to 50 percent of its original balance.

The bill now goes to the Senate Health, Education, Labor and Pensions Committee. Oregon’s other senator, Democrat Ron Wyden, has also signed on, but it may face significant opposition in the Republican-controlled Congress.

“Senator Merkley will be working hard to build support throughout Congress to move this idea forward and ensure that all students can attend college without fear of unaffordable debt,” McLennan said in an email.