A plan to allow public higher education institutions to impose immediate repayment schedules on students and threaten to sanction those who don’t repay their student loans means freshman will have to file for bankruptcy — making it difficult for those who need government-subsidized student loans.
For many of the college students who testified at the House Education and the Workforce Committee hearing this week on Tuesday, the effect on their finances could be devastating. Among the panel of experts who testified before the panel was Elaine Hall, a lawyer for the NAACP Legal Defense and Educational Fund, who is often called upon to represent students on issues related to student loans.
“Some freshmen may struggle to keep up with payments during the first year of law school,” Hall said.
Joseph Schmitz, president of Washington & Lee University, said he and the rest of the leadership at W&L couldn’t risk that.
“I am hearing from many students today that they are considering bankruptcy,” Schmitz said. “Some may live with their parents; others may live on their own. None of them have ever been in bankruptcy. Many of them are having to forego the benefit of lower cost loans. There is a real concern for student loans that is a real concern for our young people.”
Rep. Virginia Foxx, R-N.C., said the problem started after a bill that would have allowed students to repay their loans over multiple years as the size of their loans increased was vetoed by President Barack Obama in 2011. Foxx indicated this is something that should be revisited.
Under the Pay As You Earn student loan repayment plan, those who are unable to pay their loans immediately are told they can graduate on time if they are able to complete their education. If they don’t complete their education or get a job as a student, they are made to start paying monthly — and if they do not pay in a timely fashion they would be flagged as non-responders and would not be able to qualify for other loans that are offered.
Foxx said this is a problem “because many people just aren’t able to start and finish college.” She said there are 56 million people with student loans, and half of them have over $20,000 of debt.
Rep. Elijah Cummings, D-Md., the ranking member of the committee, said that under Pay As You Earn, if someone becomes unemployed after missing any payments for three years, they would lose all of their federal student loans, for good. “In just three years, they would have to repay all of their loans,” Cummings said.
“One student I met told me she did not know about Pay As You Earn and had never heard of the consequences,” he said. “She also testified that Pay As You Earn was designed to reward schools for enrolling students who would attend for a set period and graduate in a certain number of years. It was not designed to assist families whose incomes have increased over the course of their schooling.”
Many of the students who testified to the committee said they hoped to pay off their loans and saved up to take out loans. Some are first-generation college students, and said they feared they might not be able to get a good job and pay off the loan. “Falling behind on student loans is something I’ll face for the rest of my life,” said Aran Joachim-Horn of New Brunswick, N.J.
The student loan issue came up in the Oval Office on Tuesday as President Donald Trump met with Vice President Mike Pence and leaders of the Small Business Administration and Department of Commerce.
In remarks after the meeting, Trump said he wanted to make it easier for people to get student loans. “We will solve the student loan problem,” Trump said.
He said he was willing to discuss the idea of Pay As You Earn as a component of an effort to make it easier for people to get student loans.
On the other hand, Education Secretary Betsy DeVos said she had concerns about Pay As You Earn.
“Secretary DeVos has asked the administration’s economists to review PWEYE and ultimately evaluate whether it would be a good investment in student loans. She also requested that DEED officials work to secure the input of stakeholders on the impact of a PWEYE initiative on each individual school,” DeVos said in a statement after the meeting.
Foxx and Cummings have both called for the Education Department to be