Lawson Introduces Bill to Reduce Student Loan Debt
WASHINGTON – U.S. Rep. Al Lawson (FL-5) introduced the Student Opportunity Act to provide economic relief for those who have student loans.
His bill would make it possible for people with high federal student loan debt to refinance their loans at a lower rate, and it would ensure future students can afford loan financing. It also would eliminate the tax penalty for loan balance forgiveness.
“Education is a fundamental facet of the American dream. Across the country, students attend colleges and universities with the hopes of climbing the economic ladder, providing for their families, and working to meet new challenges with ingenuity and expertise,” said Rep. Lawson. “Unfortunately, the cost of college has increased significantly in the last decade and for many Americans, this avenue to a brighter future has become unaffordable. Reducing student debt will help increase economic activity and provide our nation’s students with the relief and opportunity they deserve.”
The bill currently has 12 co-sponsors: Reps. Alma S. Adams (NC-12), Nanette Diaz Barragán (CA-44), Adriano Espaillat (NY-13), Dwight Evans (PA-2), Eleanor Holmes Norton (DC), Hank Johnson (GA-4), Jim McGovern (MA-2), Carol Shea-Porter (NH-1), Darren Soto (FL-9), Dina Titus (NV-1), Juan Vargas (CA-51), and Nydia Velázquez (NY-7).
Background on the major provisions of the bill:
Refinancing for Loans Disbursed at Higher Rates: Allows for refinancing of all public, federal student loans for which the first disbursement was made before July 1, 2010 at half a percentage point higher than the 10-year treasury note interest rate.
Updated Interest Rate Formula: Modification of the current interest rate formula for all future public, federal student loans at half a percentage point higher than the 10-year treasury note interest rate.
Elimination of Origination Fees: Fees assessed when student loans are disbursed contribute to burgeoning student loan debt and are considered by many, as a tax on students aiming to fund their higher education and seeking to improve earnings potential.
Tax Relief for Debt Forgiveness: The IRS currently taxes federal student loan amounts that are forgiven through income-based repayment plans. This often leaves borrowers with a significant tax bill at the end of their 10 or 20-year or various repayment periods.