NEW YORK (MainStreet)The latest trend in Congress is to all for bailing out college students from their student loan debt. After all, the logic goes, if the American people can bail out the banks why not students? They are our greatest resource and they have a greater impact on the economy than inefficient, greedy and incompetent bankers.
For this purpose, two pieces of legislation have been introduced--one on March 21, in the House, by Rep. Karen Bass (D-CA) and the other, on May 8, in the Senate, by freshman Elizabeth Warren (D-MA).
Bass calls hers the Student Loan Fairness Act of 2013. Warren titled hers the Bank on Student Loan Fairness Act. They attempt different strategies, but in the end, the one common denominator is that the taxpayer will pay the debt of students who borrowed money to pay college tuition.
Not all students, mind you, will benefit from these plans. Certainly not the students who are working their way through college; certainly not those students whose parents mortgaged their homes to pay the tuition; certainly not the students whose parents are draining their IRA's and 401K's to pay for college.
Both Rep. Bass and Sen. Warren were contacted for comment about their legislation. Bass's office responded. Warren's office did not.
Bass's bill takes a multipronged approach to the student debt problem. It creates a repayment schedule for student loans in which an individual would be required to make ten years of payments at 10% of their discretionary income, defined as being a certain amount of income in excess of the poverty line. After such payments were made the remaining debt would be forgiven.
It also permanently caps the interest rate for all federal student loans at 3.4%. This eliminates the need for Congress to enact temporary measures every year to prevent rates from increasing as is being contemplated now.