The amount of money that today's college students owe upon graduating from college is now epic, surpassing the $1 trillion mark, and second only to mortgage debt. California Rep. Karen Bass has introduced the Student Loan Fairness Act of 2013 to help ease some of their financial burden.
"Americans owe more in student loans than automobile or credit card debt. It's crazy," Bass said in an interview with BET.com. "Over the past 10 years, the average student loan debt has increased by 511 percent, with the majority of the debt being owed by those over the age of 30."
The legislation introduced calls for student borrowers to pay 10 percent of their discretionary income on their debt for 10 years, after which the remaining debt would be forgiven. When asked whether opponents would argue that the 10-10 plan would be an incentive for people to ride out the 10 years until the debt is forgiven, Bass said that given the current level of debt, it's unlikely that anyone would be able to realistically pay off their debt in less than 10 years.
However, the bill provides caps on the amount of available forgiveness for new borrowers to discourage borrowers from taking advantage.
"The caps may encourage students to make wiser financial decisions when it comes to higher education, and in turn we're hoping it will incentivize colleges and universities to compete for students by lowering tuition," Student Debt Crisis co-founder and executive director Robert Applebaum added.
The bill also permanently caps federal student loan interest rates at 3.4 percent, eliminating the need for Congress to implement temporary measures each year that prevent rates from doubling as they are scheduled to in July, and allows eligible private loans to be converted to federal direct loans. In addition, it would suspend interest rates for unemployed borrowers and forgive loan debt owed by graduates who work in public service jobs.
Less than two hours after posting a petition to build support for Bass' bill, Applebaum received more than 500 signatures just by word of mouth.
"There's a groundswell of support out there for much-needed changes and this legislation hits the right chord," he told BET.com. "It does a great deal to help student borrowers free up some money to spend in the economy. Right now, with $1 trillion of outstanding loan debt, they're not making purchases like houses and cars and starting businesses. We're essentially consenting them to be a lost generation."
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(Photo: UPI/Kevin Dietsch /LANDOV)