WASHINGTON – U.S. Sen. Mark R. Warner (D-VA) has introduced two bipartisan proposals to provide much needed relief to young people struggling with student loan debt. One proposal allows employers to make payments towards their employees’ student loan debt using pre-tax income, and a second would make income-based repayment the default option for federal student loan borrowers. More than 60 percent of Virginia’s college students will graduate with some student loan debt, and the average student loan debt in Virginia tops $29,000 per graduate. Nationwide, Americans now owe more than $1.4 trillion in student loans, outstripping credit cards and auto loans as the country’s leading source of non-housing debt.

“As the first person in my family to graduate from college, I would not have had the chance to be a successful entrepreneur if I had left college with overwhelming student loan debt. And since I graduated, the nature of work has dramatically changed, making the burden of repaying student loans greater than it has ever been,” said Sen. Warner. “Student loan debt has a ripple effect in our economy, preventing people from taking chances that will benefit them, and the economy, in the long-run. We must do more to help younger borrowers, most of them at the beginning of their careers, manage their student loan debts better. And we should allow businesses to consider offering a new employee benefit to help their employees pay-off their student debts. These two bipartisan bills accomplish these goals while providing relief to the growing number of borrowers that are struggling with the crippling effects of student loan debt.”

The Employer Participation in Repayment Act, introduced by Sens. Warner and John Thune (R-SD), would update an existing federal program so that it works better for employees living with the reality of burdensome student loan debt. Currently, the Employer Education Assistance Program allows employers to contribute pre-tax earnings to help employees finance continued education, but does not allow pre-tax contributions for individuals who already have incurred student loan debt in the course of their undergraduate or graduate careers. The Warner-Thune bill would help those with student loan debt by allowing employers to contribute up to $5,250 pre-tax to their employees’ student loans – providing employees with much needed relief and employers with a new tool to recruit and retain quality employees. A summary of this legislation can be found here. To read the full bill, click here.

“Now more than ever, college graduates often find themselves bogged down by massive student loan debt,” said Sen. Thune. “We should be looking for creative opportunities, like the one Sen. Warner and I have proposed, that would help Americans capitalize on their investments in higher education, enter the workforce, and pursue a career. Our bill would give graduates the flexibility they need to work with employers to secure lower interest rates and pay part of their student loans back tax free. This is an obvious win for graduates, but it also helps businesses attract and retain talented employees.”

Similarly, the Dynamic Repayment Act, introduced by Sens. Warner and Marco Rubio (R-FL) would simplify student loan repayment by making income-based repayment the default option for borrowers. By encouraging greater participation in income-based repayment plans, the bill will help borrowers avoid default during periods of low earnings. While current federal student loan programs include numerous protections for borrowers to avoid default, many students don't utilize them because the enrollment process and paperwork can be confusing and burdensome. As a result, the three-year national default rate stands at more than 11 percent, an outcome that is not only expensive for taxpayers but also ruinous for borrowers. 

“Our current federal student loan program is outdated and often leaves students and college graduates burdened with a significant amount of debt. This bill will ensure that people with federal student loans have affordable payments and stronger borrowing protections,” said Sen. Rubio. “As someone who once owed more than $100,000 in student loans, this issue is personal to me, and I will continue working to simplify this complex and bureaucratic student loan system.”

The Warner-Rubio bill would make student loan repayment more manageable by replacing the complicated array of loans, subsidies, deferments, forbearances, and repayment options with a single, streamlined, user-friendly repayment plan that allows a borrower to pay an affordable percentage of his or her income until the loan is repaid. Student loan payments would be capped at 10 percent of a borrower’s income over $10,000. For example, a borrower making an annual salary of $40,000 would pay 10 percent of $30,000 – or $3,000 a year. The bill also tiers forgiveness in order to responsibly steward taxpayer dollars. If after 20 years, a balance still remains on a loan of $57,500 or less, the remaining debt will be forgiven entirely. If the balance is more than $57,500, the loan will be forgiven after 30 years of repayment. A summary of this legislation can be found here. To read the full bill, click here.

Both bills were previously introduced in the 114^th Congress. Sen. Warner has been an advocate of measures to help students make informed choices when choosing a college or university, and protect college students on campus. He has backed a bill to provide college-bound students powerful new tools for comparing colleges’ and universities’ programs based on cost, likelihood of graduating, and potential earnings, and sponsored legislation to combat the epidemic of sexual assault on college campuses and improve support for survivors.

Full transcript below:

Too many students come out with huge amounts of debt. On average in Virginia its 29,000 dollars. And the challenge is, coming out with that amount of student debt, into a workplace that is very different than the workplace I entered 35 years ago.

Long time ago it used to be you go work for a single job, and potentially stay there your whole career. Virtually nobody is going to work for the same firm for thirty years anymore. Millennials particularly know this. They move from one job to another. And unfortunately, if you have that level of student debt, your ability to move around, take chances or pursue the kind of career you want in this 21^st century economy is dramatically reduced.

So, for the long term growth of our economy, from making sure that young people entering the workforce have the flexibility that this workforce demands, and to make sure we can approach this problem in a commonsense, bipartisan way I’ve introduced two pieces of legislation.

One that would make your student debt repayment contingent upon how much money you are making, so in effect, income-based repayment. Commonsense and that ought to be the number one option for every student coming out of college.

And secondly, we have to make sure that employers who want to try to help pay down student debt can pay that student debt down for their employees the same tax-advantaged way that they can pay ongoing tuition costs.

Both of these bills make commonsense and would really meet with the emerging workforce, with these debt levels that they have, with the kind of tools they need to compete and live in a world that is changing and to make sure that they are prepared for the future of work in the 21^st century.

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