[credit provider=”Daniel Goodman / Business Insider”]
If one Wisconsin Republican gets his way, America’s student loan program is about to become much more European.Rep. Tom Petri plans to introduce to Congress a complete student-loan overhaul that will allow for automatic withdrawals from a borrowers’ paychecks, Bloomberg reported Tuesday.
The plan could actually be good for borrowers because it would cap the amount taken at 15 per cent of their incomes after basic living expenses.
That model would be similar to systems already used in the U.K., Australia, and New Zealand.
Federal and private student loan debt has become so huge it’s actually surpassed credit card debt and is on track to top $1 trillion this year, Mint Press News reported in July.
And as students continue to have trouble finding secure employment, the private loan companies contracted by the U.S. government to ensure repayment are becoming more aggressive as they try recoup lost payments, Washington Monthly reported in September.
Those aggressive tactics could be blamed for the soaring number of suicides among graduates drowning in debt.
“Suicide is the dark side of the student lending crisis,” Cryn Johanssen, Founder and Executive Director of All Education Matters, told MPN. “The public needs to be aware of how bad things have gotten for student loan debtors. This is a national emergency and it needs to be solved now.”
Petri’s proposed plan would essentially eliminate the need for private debt-collection companies since the Education Department and the Internal Revenue Service would manage the monthly withdrawals.
So that army of debt collectors the Education Department hired back in March to go after loan defaulters might become completely useless if Petri’s legislation is adopted.
“This doesn’t mean leaving taxpayers on the hook if a student borrows too much — everyone would still pay back what they borrow under this system,” Petri said in an e-mail to Bloomberg. “It does mean providing much stronger protections against the kind of financial ruin that is all too prevalent in our current system.”