Republicans in the House of Representatives have proposed a new student loan repayment plan that would allow borrowers to tie loan payments to their incomes and, for those who keep up with their payments, prevent balances from rising over time. But some critics allege that the plan would “trap borrowers in debt for three decades or longer,” according to one commentator. Democrats in Congress have also made “thirty years” of debt a central aspect of their messaging against the new plan.
But these charges are misleading at best. Most borrowers would pay off their loans faster under the Republicans’ proposed Repayment Assistance Plan (RAP) than they would under plans that the Obama and Biden administrations created.
RAP sets borrowers’ payments according to their income. If those payments are not sufficient to cover interest, the government waives unpaid interest and credits the borrower’s principal balance up to $50 per month. This ensures that borrowers who keep up with their payments pay down their debts over time.
Contrast this with income-driven plans created under the Obama and Biden administrations. The Obama administration’s PAYE plan offers no principal credit and only limited waivers of unpaid interest; instead, it forgives remaining balances after 20 years of payments. This plan typically results in rising balances over time. The Biden administration’s SAVE plan does waive unpaid interest, but its exceedingly low payments (most borrowers pay $0 every month) and lack of a principal credit mean few borrowers pay down their debts. Again, remaining balances are forgiven after 20 or 25 years.
This forgiveness-driven approach proved unpopular in practice. Borrowers raged over rising balances, while many wondered whether they would actually get forgiveness due to the government’s failure to properly count qualifying payments. Learning from the failures of PAYE and SAVE, Republicans’ RAP takes a different approach. By frontloading assistance—borrowers get help paying down principal immediately, rather than waiting around for forgiveness—it aims to help borrowers retire their debts faster.
In most cases, borrowers pay off their loans faster under RAP than they do under PAYE or SAVE. A typical college graduate with $30,000 in debt and a $45,000 starting salary will pay off her loans in full in just over 10 years under RAP. The same borrower would take 13 years to pay off her loans under the Obama administration’s PAYE plan. Under SAVE, she would not pay off her debts at all, but receive forgiveness after 20 years.
SSOther types of borrowers also pay off their debts faster under RAP than existing plans. If the goal is to offer a repayment plan where payments are sensitive to income, but borrowers also pay off their loans quickly, RAP has a clear advantage over other plans.
So where does the “30 year” talking point come in? RAP discharges any debt balance that remains after 30 years. Opponents of the plan have compared it to PAYE and SAVE along this dimension alone—while ignoring RAP’s other benefits, which generally ensure borrowers pay down loans faster than they do on other plans.
Why include the 30-year provision at all, then? Frontloading repayment assistance costs money; RAP needs to offset the costs somewhere else. Around 2 percent of borrowers owe more than $200,000, but these account for almost 20 percent of outstanding balances in the student loan portfolio. The costs of waiving interest for these loans are enormous, so an extended repayment timeline is necessary to make the budget math work. Even so, many borrowers with very high debts will still pay off their loans before they reach the 30-year mark.
Misleading talking points about “trapping borrowers in debt for three decades” belie the fact that, in most cases, borrowers will retire their loans faster under RAP than other income-driven repayment options. Rather than forcing borrowers to wait 20 to 25 years for loan forgiveness, RAP will empower them to pay off their student debt and move on with their lives as quickly as possible.
Preston Cooper is a senior fellow at the American Enterprise Institute (AEI), where his work focuses on higher education ROI, student loans, and higher education reform. Before joining AEI in his current role, Dr. Cooper was a senior fellow in higher education policy at the Foundation for Research on Equal Opportunity, a research analyst at the American Enterprise Institute, and a policy analyst at the Manhattan Institute for Policy Research. His work has appeared in the popular press, including in the Wall Street Journal, the Washington Post, Forbes, Fortune, RealClearPolicy, and National Review. Dr. Cooper has a PhD from George Mason University and a bachelor’s degree from Swarthmore College.
Reprinted with permission from AEI.org by Preston Cooper.
The opinions expressed by columnists are their own and do not necessarily represent the views of AMAC or AMAC Action.
30 years.. sounds like a MORTGAGE! They borrowed it. Get an extra job, live BELOW your income. PAY YOUR LOANS…18 year olds were ‘adult’ enough to take out loans– 24 year olds are ADULT enoungh to pay them
Oh for crying out loud…my kids paid off their loans. I paid off mine.
Get a grip…..pay your bills. You signed in the bottom line.
Just pay the loans, you deadbeats. No one forced you to take them out and take basket weaving (that’s what they used to call it when I went to UCLA from 1966-1970.
My kids never stopped paying their loans especially during the time of “NO INTEREST”.
I’m sick of everybody wasting time to “help” these deadbeats. THEY SIGNED A CONTRACT. THEY AND THEY ALONE ARE RESPONSIBLE FOR PAYING THESE LOANS BACK. At the time I and my husband were required to start making payments on our student loans, there was NO pause due to unemployment. I was the only one employed for a time. I PAID OUR RENT, A CAR PAYMENT, OTHER LIVING EXPENSES AND BOTH OF OUR STUDENT LOAN PAYMENTS for almost 18 months until he was employed. I did all of that on less than a $30,000.00 annual salary. How? By living on a very tight budget with NO frills at all. We became very good at distinguishing between ‘wants” and “needs.” And with that discipline, we PAID BACK EVERY PENNY WE BORROWED. We owe ZERO to these DEADBEATS.
It is a LOAN. It has to be paid back. It wasn’t free money.
I put myself through an affordable state university by participating in their engineering co-op program and working weekends & vacations as a security guard in facilities where I was allowed to study while on duty.
I graduated debt-free and really ready for a social life.
These people who borrow money for Education should pay back, why American public be penalize for their unwillness to payback. At least they now know there is down side of judgement!
People do need to pay their own debts!!! If you signed on the signature line, you owe the money, not me or the neighbors or the guy down the street!! Pay your own debts!! I’m disgusted by all of the freebies that Democrats are happy to give out to anyone except the American citizen!!!
What we’re teaching the kids is “Why pay back your loans? Someone will step in and forgive it.” So it should be no surprise when they start taking the same attitude towards car loans and home mortgages.
Deal with it kids! You signed the loan, pay off your debt!
Maybe what congress should do is make every loan include repayment information like they now have to provide with credit cards. Make it a document the borrower has to sign and acknowledge. That way, these students (who don’t understand math) can see how long and how much they’ll be paying back in total with minimum payments. Then maybe they’ll reconsider going in debt for $40,000 per semester to earn a useless degree in underwater basket weaving.
Until paying back their loans is a PRIORITY, rather than a new car, nice furniture, weekly trips to the nail salon, and coffee at Starbucks every day, etc. these “students” will be paying off loans for a long time.
A loan that requires 30 years to repay must be substantial with that kind there should be an opportunity of a job that should pay very good money, what am I not getting?
My grand daughter Graduated from college 2 years ago. Got a good paying job. Took out a car loan for 6 years will have it paid off in 3 years. Or less Making student loan payments.. After she gets her car paid off will increase her student loan payments, Already paying more on her student loan than she has too. Will have it paid off ahead of schedule.. It can be done
Why should the American taxpayer be saddled with their debts?
This Republican RAP seems to be a sensible way for people to pay off their student loans. Loans ARE to be paid back, not given away to buy votes, so others can pay the loans off. If you made a poor choice in choosing your degree field, that’s on you, not the taxpayer.
It’s just another mischancing of the wording to make any form of repayment a dirty word. Like many people have commented here, no one forced those who took out these student loans to sign up for the debt and because the real world is not delivering up those “dream high paying jobs” doesn’t eliminate the obligation of repayment. Yeah, there’s a problem of colleges overcharging because of the “pedigree” of their diploma, which we can blame Congress for not providing a maximum ;limit instead of vague reference ro coverage in offering student loans. BUT the definition of a loan includes repayment. Hey there’s 2 choices here–pay it off as best as possible or accept the credit damage to your credit line. Student loans should never have interest rate applied anyway which should also be an incentive to not let the school overcharge by the guaranteer.
How can we expect grads with debt from student loans to understand whether these programs will be beneficial to them or negatively consequential. Have you spoken with a liberal arts major? A fence post could beat one in a game of chess. They take no classes of substance, have professors of no substance attending colleges without substance. It, like our Ukraine conflict involvement is a racket.
As for these idiots still wanting me to subsidize their idiotic borrowing habits. I should remind them that I might go Charles Whitman before allowing that to happen. In obtaining my degree I amassed a whopping $350 in student loans. The reason? To take a driving vacation with my wife and recently born son. I paid it off in far less than half a year. My wife about a decade and a half later amassed about $3000 in loans and that went toward a down on a new car. After she graduated a balloon payment was made and the loan discharged well within 30 days of receiving the first repayment notice.
Its called “being a grown up”. Young folks should give it a shot.
I’m sorry, but this entire student loan “program” is nothing but a scam. It sucks young people in with lies and promises that are more lies. The entire program needs to be scrapped. Stop lying to these kids about how easy it will be to repay these loans and that they don’t have to pay until they get jobs, or for “X” months after they graduate. It’s all smoke and mirrors and BS LIES!
For you kids out there getting ready to go to college, DO NOT FALL FOR THE BS STUDENT LOAN SCHEME. Get a job to help pay for your schooling. Go to a school you can afford, even if it means a community college for 2 years. Apply for scholarships and work hard to maintain your scholarship(s). Don’t fall into the trap of applying for thousands of dollars in student loans unless you’re positive you’ll be able to get a job in your field and you’ll make the money you need to repay your loan(s). DO NOT listen to those financial aid “gurus.” Talk to people who’ve taken out loans and paid them back. Listen to what they went through and how long it took for them to repay their loans. I don’t know anyone who’s had an easy time of it. Everyone has struggled and sacrificed to pay off their student loans. Almost all of us regret falling for the student loan scheme. Most of us realized too late that working a job and saving to offset costs was the way to go. Yes, it’s tough, but it is doable.
Perhaps I live in the dream world as a parent that has a daughter that graduated from college debt free. I feel strongly that overall parents approach College backwards. Let’s face it. It’s not the child that is paying for their education. It’s the parents. Therefore, to me, parents need to be more scrutinizing of how they’re going to pay for their child’s college education. You would go in blindly and buy a home sign on the dotted line for a mortgage without a total amount of cost and how it’s going to be paid for. The overall cost is reviewed per year and the parents need to accept the fact that this is a lone. That is their responsibility for paying within a timely manner. To me if you go to a 4 or 5 year college it took you four four or 5 years to build that debt. It should take you 4 or 5 years to pay that debt. I know people that have graduated 10 years or more and still paying student loans because it’s not a high priority. The government needs to get out a subsid3izing tuitions 100%. I feel that this would cause the colleges to balance their books and provide an education for what the overall public is wanting. Therefore they would be responsible for paying the instructors and the cost of tuition to balance their books and they would have to aggressively compete for students with other colleges.
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You’ve heard the phrase, i.e. the apple doesn’t fall far from the tree. Chances are their parent(s) were deadbeats at some point and/or never taught these kids principles of being responsible for their own actions. There should be some nationwide financial database that provides info to lenders (like a bank) that would disallow someone a car / home loan. if they have an outstanding student loan.
They don’t like the terms? Fine, NO LOANS!