Plan to Change Student Loan Repayment System Isn’t a Help to Borrowers
With more and more people struggling under student loan debt, and with student loan providers having powers and rights that many other creditors do not, this does not sound like a great time to be giving them even more power. However, a new proposal being considered by congress could give student loans the power to have your student loan payment taken directly out of your pocket.
Proposal Would Take Money From Borrowers’ Paychecks
The proposal, being put forth by Senator Lamar Alexander, would require borrowers to make payments capped at 10% of “discretionary income.” There is no word on just how discretionary income will be defined or calculated.
The second option for student loan borrowers would stretch over 10 years, but would be income based.
In both scenarios, it would be employers that are responsible for deducting what employees owe under student loans, and sending that money straight to the government.
In normal situations, your employer only has the right to garnish your wages and send them straight to a creditor, if there is a judgment outstanding and a court orders that wages be garnished. Wages can also be garnished for back owed child support. Even student loans currently have a wage garnishment system.
However, for all of these, there is still some semblance of due process, and they are often only implemented if there is a default in payment. That means that there will be some kind of notice, and the right to put forth defenses, or have a case heard before a judge or at least some kind of administrative body before having money automatically deducted from a paycheck.
That’s why the proposal is being called by some as nothing more than mandatory wage garnishment without due process.
Privacy and Income Repayment
Many borrowers also may not want or like employers knowing the details of their student loan payment. Consumers should be wary of a plan that allows employers automatic access to consumers’ personal debt-related information, which they otherwise would not be able to access under the Fair Debt Collection Act (FDCPA) and other privacy laws.
There also currently exists a process of paying student loans based on income, called income based repayment (IBR). With IBR, if a borrower makes too little (or has no income), he or she may qualify to make no student payment at all. Thus, paying based on income is not a new idea or one that would afford borrowers any relief they didn’t otherwise currently have.
Alexander and other Senators who favor the proposal, are of course couching the proposal in terms of helping borrowers. In fact, one supposed “expert” was quoted by CNBC as saying that many borrowers can pay back their student loans if forced to, they just currently have “difficulty managing their money,” a problem that this proposal would supposedly solve.
The current feeling is that there will be some revisions to the proposal, but some kind of student loan reform is likely to happen in the near future.
Get help with your student loans and help applying for the available loan relief programs. Contact the Miami student load debt defense lawyers Jacobs Legal today to discuss your student loan options.