CENTER FOR AMERICAN PROGRESS: To Improve College Degree Attainment, CAP Offers Solutions for Simplifying and Streamlining Student-Loan Repayment System

Career College Central Summary:

  • Modernizing the way student loans are repaid in order to promote affordability, eliminate default, and reduce taxpayer costs are at the heart of a new student-loan repayment proposal from the Center for American Progress. A new report from CAP proposes creating a new system that utilizes the Internal Revenue Service’s, or IRS’s, wage-withholding system to repay student loans automatically. This modern system would make all federal borrowers eligible for simple, affordable repayment terms based on income and employ modern data exchanges and smart strategies to help students proactively manage student-loan debt. Automatic loan repayment would be the default method of repayment under the new system, and it would offer incentives to student borrowers to boost participation.
  • This new loan repayment structure is part of CAP’s overarching College for All proposal, under which the federal government would provide every high school graduate financial support at a level equivalent to the tuition and fees of a public four-year college or university, ensuring that all high school graduates and their families know that they can afford college. Students would repay a portion of the aid provided by the federal government, but the plan would use the IRS’s wage-withholding system to automatically repay student loans; provide simple, affordable repayment terms for all borrowers; share savings earned by the U.S. Department of Education with borrowers; and build a smarter system that proactively helps borrowers manage their debt.
  • “Modernizing our student-loan repayment program is critical to increasing degree attainment and ensuring that higher education remains within reach for all students and families,” said Elizabeth Baylor, Associate Director of Postsecondary Education at CAP. “CAP’s proposal would simplify and streamline student-loan repayment to make it more affordable, thus minimizing delinquency and default.”
  • “CAP’s College for All proposal is aimed at improving degree attainment—especially among students from low- and moderate-income families. Simplifying our overall financial aid system, which in its existing form can be highly confusing for many students and their families, will go a long way toward achieving this goal,” said David Bergeron, CAP’s Vice President of Postsecondary Education.

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CENTER FOR AMERICAN PROGRESS

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