A new Republican proposal would aim to address the looming student loan debt crisis by automatically garnishing wages of graduates to pay for the loans — an idea being slammed by education experts.
As Newsweek reported, the plan comes from Tennessee Senator Lamar Alexander, chairman of the Senate committee on Health, Education, Labor and Pensions. Alexander is pushing a multi-pronged plan that would require higher education institutions to prove that students are able to repay loans, streamline the FAFSA application process, and give graduates new options on how to repay their loans.
Those proposed repayment options are garnering plenty of criticism. Alexander’s plan proposes two different options to repay loans, both of which include money being taken directly from post-graduation paychecks and sending it to loan holders.
That idea is drawing a sharp rebuke from the National Consumer Law Center, which released a report laying out the potential dangers of taking money directly out of the post-graduation paychecks.
“For borrowers with tight budgets that need to be navigated on a monthly basis, forced automatic payroll withholding may mean diverting money away from rent, heat or food in order to pay their student loans,” the report noted.
Experts have warned that the rapidly increasing cost of higher education and the tens of thousands of dollars in student loans for graduates is creating a bubble that will soon pop, sending shockwaves through the economy. As Bloomberg reported last year, student loans have had 157 percent in cumulative growth over the last 11 years, which is significantly faster growth than other areas of lending. For example, auto loan debt has risen by 52 percent during that same time period, while mortgage and credit card debt actually fell by 1 percent.
The report noted that the cost of higher education is also growing so rapidly that there will soon be a generation of students who will never be able to repay their student loans.
“Students aren’t only facing increasing costs of college tuition; they’re facing increasing costs of borrowing to afford that degree,” John Hupalo, founder and chief executive officer of education financial planning company Invite Education, told Bloomberg. “That double whammy doesn’t bode well for students paying off loans.”
Democrats have also proposed a number of different plans to address the student loan crisis, including programs that offer loan forgiveness to students who meet certain criteria, like agreeing to work for a specific period after graduation in low-income or high-need areas.