With Election Day about a month away, Congress is accomplishing little with many representatives and senators either campaigning for their own re-election or stumping for the presidential candidates. However, they’ll have plenty of work — especially regarding student loan legislation — awaiting them following the election and into January when the 115th Congress assembles in January.
Several bills aimed at relieving the individual and societal burden of student loan debt have been introduced in recent months. Whether these bills proceed piecemeal or are merged into the upcoming reauthorization of the Higher Education Act is yet to be seen. Reauthorization is an opportunity for policymakers to evaluate existing legislation, make improvements, add new programs and review funding levels.
[Discover 10 student loan facts college graduates need to know.]
The Higher Education Act, the primary law governing federal higher education programs such as federal student loans, is up for reauthorization every five years in general, although rarely does it happen on time. The last reauthorization was technically due in 2014 but has been stalled up to this point.
While most of the student loan-related bills introduced in recent months have been referred to the respective committees for review, where they lie languishing, a few have progressed further. Some of the bills we discuss below have passed at least one chamber of Congress — in these cases, the House of Representatives. Remember, though, that none of these have become laws yet — but they have a fighting chance as things stand today.
— Empowering Students Through Enhanced Financial Counseling Act: This bill would require higher education institutions to replace entrance student loan counseling for first-time federal student loan borrowers with annual counseling.
It would likewise expand the requirement to include federal Pell Grant recipients and parent PLUS loan borrowers. The U.S. Department of Education is also experimenting with loan counseling in a separate initiative.
[Read more about when students may see changes to loan counseling.]
— Simplifying the Application for Student Aid Act: This bill would ensure that students and families can continue to complete the Free Application for Federal Student Aid — the starting point for applying for all federal aid, including loans — using income tax returns from two years prior to the application date through a process known as “prior-prior year.”
Although the law allowed for the use of prior prior data, the FAFSA traditionally relied on income tax data from the previous year only. This year, the Department of Education is using its authority for the first time to allow prior-prior data on the FAFSA.
The Simplifying the Application for Student Aid Act was drafted before the Department of Education made this administrative change ; so instead of kicking off the prior-prior process, this legislation would instead amend the Higher Education Act to ensure the policy continues in the future.
The bill would also require the Department of Education to allow applicants to more easily import their available income data through the Internal Revenue Service directly from their tax returns, eliminating many questions students and families struggle to answer. The FAFSA would also have to be made available on a mobile application.
[Learn the importance of filling out the FAFSA early.]
— Stop Taxing Death and Disability Act: While this bill has not passed either full chamber of Congress, both the House and Senate recently passed it for consideration. This bill would stop the practice of taxing forgiven student loan amounts when the borrower dies or becomes disabled.
Currently, federal student loans are eligible for discharge in cases of death or disability, but taxes must be paid on the amount forgiven — which could mean a significant tax bill for the borrower or the borrower’s family in the year the loan is forgiven.
— Employer-led student loan repayment plans: Several bills — Employer Participation in Student Loan Assistance Act, the Student Loan Employment Benefits Act of 2016, the HELP for Students and Parents Act and the Student Loan Repayment Assistance Act of 2015 — have been filed that would create incentives for employers to create student loan assistance programs to help employees pay down and manage education debt.
The main idea behind these bills is to create tax benefits for employers for either making qualified student loan payments on employees’ behalf or reimbursing the employee for payments made, similar to the tax credits that exist now for employer tuition assistance. Additionally, the borrower would not have to pay taxes on the funds provided by the employer toward the student loan.
While these bills have yet to pass either full chamber of Congress, more employers lately have been offering student loan assistance as a workplace benefit. Some states are also starting to move on their own legislation.
While the final outcome with these different student loan-related bills is unclear, a few common issues have arisen on both sides of the aisle, including streamlining regulations imposed on higher education institutions, increasing transparency for college costs, simplifying loan repayment programs and discussing free or debt-free college.
These subjects likely will all play a part in higher education discussions in the new Congress, but their priority will depend largely on the makeup of the Senate and who will shape higher education legislation as chair. If you feel strongly about any of these bills, contact your representative, and stay tuned with the Student Loan Ranger for future updates.
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New Legislation on Student Loans Under Review originally appeared on usnews.com
