Center for American Progress

RELEASE: To Improve College Degree Attainment, CAP Offers Solutions for Simplifying and Streamlining Student-Loan Repayment System
Press Release

RELEASE: To Improve College Degree Attainment, CAP Offers Solutions for Simplifying and Streamlining Student-Loan Repayment System

The new report is part of CAP’s College for All proposal, which builds on ideas proposed in CAP-convened Inclusive Prosperity Commission report.

Washington, D.C. — Modernizing the way student loans are repaid in order to promote affordability, eliminate default, and reduce taxpayer costs are at the heart of a new student-loan repayment proposal from the Center for American Progress. A new report from CAP proposes creating a new system that utilizes the Internal Revenue Service’s, or IRS’s, wage-withholding system to repay student loans automatically. This modern system would make all federal borrowers eligible for simple, affordable repayment terms based on income and employ modern data exchanges and smart strategies to help students proactively manage student-loan debt. Automatic loan repayment would be the default method of repayment under the new system, and it would offer incentives to student borrowers to boost participation.

This new loan repayment structure is part of CAP’s overarching College for All proposal, under which the federal government would provide every high school graduate financial support at a level equivalent to the tuition and fees of a public four-year college or university, ensuring that all high school graduates and their families know that they can afford college. Students would repay a portion of the aid provided by the federal government, but the plan would use the IRS’s wage-withholding system to automatically repay student loans; provide simple, affordable repayment terms for all borrowers; share savings earned by the U.S. Department of Education with borrowers; and build a smarter system that proactively helps borrowers manage their debt.

“Modernizing our student-loan repayment program is critical to increasing degree attainment and ensuring that higher education remains within reach for all students and families,” said Elizabeth Baylor, Associate Director of Postsecondary Education at CAP. “CAP’s proposal would simplify and streamline student-loan repayment to make it more affordable, thus minimizing delinquency and default.”

“CAP’s College for All proposal is aimed at improving degree attainment—especially among students from low- and moderate-income families. Simplifying our overall financial aid system, which in its existing form can be highly confusing for many students and their families, will go a long way toward achieving this goal,” said David Bergeron, CAP’s Vice President of Postsecondary Education.

College for All expands on a provision included in a recent report from the Commission on Inclusive Prosperity, or IPC, a transatlantic board convened by CAP, composed of high-level American and international policymakers, economists, business leaders, and labor representatives, and focused on finding ways to expand the middle class through inclusive economic growth. An overly complex system of financial aid, among other barriers, bars many low- and middle-income students from two- or four-year postsecondary education programs. The IPC’s report calls for aggressive action to expand postsecondary education opportunities for all Americans.

Additional forthcoming reports from CAP on College for All will also address how much the federal government would provide to cover costs at community colleges, public four-year colleges and universities, and private nonprofit and for-profit colleges; how those amounts will be determined; and the levels of grant support that would be provided to low- and moderate-income students. The reports will also address how much College for All will cost taxpayers and what the return on this investment will be.

The overall goal of CAP’s College for All plan will be to ensure that the United States has the skilled workforce and educated citizenry needed to achieve inclusive prosperity and to create a postsecondary education system that encourages economic growth.

Click here to read “Increasing Postsecondary Attainment Through Smarter Student-Loan Repayment” by Elizabeth Baylor and David A. Bergeron.

Related resources:

Strengthening Our Economy Through College for All by David A. Bergeron and Carmel Martin

For more information or to speak with an expert, contact Allison Preiss at [email protected] or 202.478.6331.

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