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ADA urges Congress

Minimize student debt burden

Washington—Passage of legislation to reverse an increase in federal student loan interest rates is encouraging but lawmakers should consider additional reforms, the Association told Congress. President Obama was expected to sign into law bipartisan legislation that would apply to loans issued after July 1, 2013.

The Association in a July 29 letter to all members of Congress said the ADA was "encouraged" by the legislation reversing a July 1 student loan interest rate hike. The letter offered a statement of principles for Congress to consider toward minimizing "the burden of student debt."

"We are particularly pleased that both versions of H.R. 1911 call for a study and report to Congress on the actual cost to the federal government of administering the student loan programs authorized by the HEA (Higher Education Act)," the Association said. "We understand H.R. 1911 has a very narrow focus, however, and that additional concerns about these loan programs will be addressed in future legislation."

The letter urged Congress to consider the following principles in crafting future legislation.

• Interest rate(s). Tie the interest rate on student loans to prevailing market rates (e.g., the bond equivalent rate of 10-year Treasury bills) plus just enough to administer the program(s).

• Interest accrual. Cap the amount of interest that can accrue on student loans once the total accrued amount equals 50 percent (or less) of the principal.

• Refinancing. Allow ALL student loans to be consolidated and refinanced more than once into private loans to take advantage of lower interest rates. This includes post-2006 loans.

• Deferment period. Extend the deferral period for repaying student loans from six months until at least one year after completing school.

• Delinquency. Require lending institutions to take a collaborative (rather than a punitive) approach to handling borrowers who fail to pay their full repayment amount for a taxable year.

The Association also urged Congress to amend the federal tax code and bankruptcy laws to help minimize the burden of student debt.

• Tax treatment. Expand and enhance the deductibility of student loan interest. (The ADA strongly supports H.R. 1527, the Student Loan Interest Deduction Act of 2013 introduced by Rep. Charles Rangel (D-N.Y.). This bill would double tax deductions for student loans and eliminate income phase-outs.)

• Bankruptcy. Permit student loans to be discharged in the unfortunate event of bankruptcy.