A GOP Proposal Could Have Student Loan Payments Taken Out of Your Paycheck

If you’re one of the 44 million student loan borrowers, you might be familiar with making monthly payments towards those loans. But a new proposal from Sen. Lamar Alexander (R-TN), chairman of the Senate Health, Education, Labor and Pensions Committee, may change how you pay back your student loans — by automatically deducting monthly payments from your paycheck.

Alexander laid out the details of this overhaul to the student loan system during a speech last week that discussed the reauthorization of the Higher Education Act of 1965, the federal law that governs higher education, Forbes reports. Under his proposal, Alexander advocates having automatic payroll deductions for student loan repayment, meaning that your monthly student loan payment would be taken out of your paycheck like taxes are.

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According to CNBC, there would be two repayment plans: one where the borrower’s monthly bills are capped at 10 percent of their discretionary income and another that spreads the payments out over a decade. Under the proposal, employers would be required to take the student loan repayment out of the employee’s paycheck and send it to the government.

Alexander said his proposal would streamline the student loan system and protect borrowers.

“It makes sure if there were no money earned, there would be no money owed and that would not reflect negatively on a borrower's credit,” he said of the proposal.

But with the average student loan debt upon graduation being approximately $30,000, consumer advocates were concerned about the proposal and quickly criticized it, calling it “mandatory wage garnishment.”

“For borrowers with tight budgets that need to be navigated on a monthly basis, forced automatic payroll withholding may mean diverting money away from rent, heat or food in order to pay their student loans,” a report from the National Consumer Law Center says.

Under the current system, however, when a borrower defaults on their student loans, the government can currently garnish up to 15 percent of their wages, which is actually higher than the 10 percent that Alexander is proposing.

But critics, such as Barmak Nassirian, director of federal relations at the American Association of State Colleges and Universities, have called the proposal a “detour from real reform,” adding that some employees may have reservations about having their employers knowing the details of their debt.