Spurred on by Senator Lamar Alexander, the Republican from Tennessee who heads the health, education, work and pensions committee, Proposal would consolidate the nine current student loan repayment programs into just two.

“In March, Congress agreed that 43 million Americans who have student loans would not have to pay a monthly payment until October 1,” Alexander said.

“October 1 is just around the corner, so what we’re suggesting is that if you have no income, you have no monthly payments. If you have income, we are changing the student loan payment system so that you never have to pay more than 10% of your income after deducting basic necessities like mortgage and food.

The 10% would only apply to incomes above 150% of the federal poverty line, now $ 19,140 per year for an individual. Borrowers who earn less than this would have no monthly payments.

In addition to the income-based plan, Alexander’s proposal would also allow a standard 10-year mortgage-style repayment plan.

Overhauling the student loan system has long been a priority for lawmakers, especially as they have considered rewriting the higher education law that underlies most federal college and university laws.

But consensus has been elusive between Democrats and Republicans, and Alexander’s proposal, who is withdrawing from Congress, is remarkable in that, unlike other parts of the Republicans Senate package of bills, it would be a permanent change, not a temporary one. change related to virus outbreak.

Advocates for student borrowers, however, were unimpressed.

On the one hand, that wouldn’t prolong the March CARES law hiatus on student loan payments, collections and accrued interest. Lawyers worry for months that student loan borrowers are not prepared to resume their debt payments given the economic devastation caused by the continuing pandemic.

The resumption of payments and collections will have particularly devastating consequences for borrowers who default on their student loans, said Persis Yu, director of the Student Borrower Assistance Project at the National Consumer Law Center.

“Borrowers will start receiving collection calls from debt collectors on October 1,” Yu said. Additionally, under the proposal, the Education Ministry can presumably resume using its extraordinary collection powers. to recover overdue student loans, including garnishing wages and clearing social security benefits and tax refunds, Yu said.

“What’s crazy, there is always a pandemic raging,” she said.

Many of these borrowers experienced delays in receiving the benefits of the CARES Act, the ministry still seizing wages and tax refund even weeks in the collections break period.

For borrowers who are up to date with their loans, Alexander’s proposal offers less flexibility than what is already available, Yu said. includes a series of repayment plans with several that allow borrowers to repay their loans as a percentage of their income with the option of forgiveness after a certain number of years of repayment.

The complexity of the system was a cause for concern for borrower advocates for years and addressing it has been a goal of Alexander for some time, but his proposal eliminates some of the choices borrowers have in the current system, Yu said.

For example, currently married student loan borrowers who file their taxes separately from their spouse can opt for a repayment plan that only assesses their own income instead of including their spouses as well. According to Alexander’s proposal, this option is removed.

Under the current system, some graduate school debtors can use a repayment plan that allows their debt to be written off after 20 years of income-related payments. Under Alexander’s plan, borrowers with graduate debt must make payments for 25 years to receive a discount.

Current student loan borrowers who like their repayment plan can keep it under Alexander’s proposal, but borrowers who begin repayment after October 1 should choose from the new options. Current student loan borrowers who work on Civil Service Loan Forgiveness – a program that allows public servants to recover their federal student loan debt after 120 payments – would be subject to a penalty under the proposed loan. ‘Alexander if they change their repayment plan.

“It’s a worse version of what we already have,” Yu said of Alexander’s proposal.

There may also be challenges in implementing Alexander’s plan. Borrower advocates have complained for years that student loan companies are not doing enough to ensure borrowers end up with the most affordable repayment plan they are entitled to. They were already concerned that student loan companies would be slammed with calls to change repayment plans once the CARES Act payment hiatus is over.

Under typical circumstances, the change in repayment plan can take several weeks for borrowers. “There is no way to create a new repayment plan in two months,” Yu said.