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Idea of the Day: How to Reform the Student-Loan-Repayment System

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As more students are struggling to pay back their student loans after graduation, it is now more important than ever for borrowers to have access to a student-loan-repayment plan that eases the burden of repayment and minimizes the risk of default. Students today face staggeringly high tuition bills, a youth unemployment rate of 12.5 percent, and a complicated assortment of student-loan-repayment plans that can be difficult to navigate even for the borrowers lucky enough to find well-paying employment. Recognizing these obstacles, President Barack Obama and Congress have expanded student-loan repayment options, and advocates have proposed various plans to make it easier for borrowers to pay back school debt. Even with these advances, however, it is clear that existing student-loan-repayment options aren’t working for many borrowers.

Borrowers of federal student loans are finding it increasingly difficult to make timely payments on their debt. With $864 billion in federal loans and $150 billion in private loans, student debt in America now exceeds $1 trillion. More than 13 percent of students whose loans came due in 2009 were in default on their debt as of September 2012, meaning that they hadn’t made a payment in at least nine months. What’s more, another 26 percent of borrowers were delinquent on their loans, meaning that they missed payments on their loans for more than 60 days. Borrowers who fall behind on their student-loan payments can face poor credit ratings and wage garnishment, and the federal government incurs additional costs as it attempts to recover the loans.

The Higher Education Act—which authorizes federal student-aid programs for postsecondary education and is up for reauthorization in 2013—provides an opportunity for policymakers to redesign the student-loan-repayment system. As Congress considers possible changes, it is important for everyone to understand the various options.

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Print: Katie Peters (economy, education, poverty, Half in Ten Education Fund)
202.741.6285 or kpeters@americanprogress.org

Print: Anne Shoup (foreign policy and national security, energy, LGBT issues, health care, gun-violence prevention)
202.481.7146 or ashoup@americanprogress.org

Print: Crystal Patterson (immigration)
202.478.6350 or cpatterson@americanprogress.org

Print: Madeline Meth (women's issues, Legal Progress, higher education)
202.741.6277 or mmeth@americanprogress.org

Spanish-language and ethnic media: Tanya Arditi
202.741.6258 or tarditi@americanprogress.org

TV: Lindsay Hamilton
202.483.2675 or lhamilton@americanprogress.org

Radio: Chelsea Kiene
202.478.5328 or ckiene@americanprogress.org

 

This is part of a regular column: Idea of the Day

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