His bill would make it possible for people with high federal
student loan debt to refinance their loans at a lower rate, and it would ensure
future students can afford loan financing. It also would eliminate the tax
penalty for loan balance forgiveness.
“Education is a fundamental facet of the American dream.
Across the country, students attend colleges and universities with the hopes of
climbing the economic ladder, providing for their families, and working to meet
new challenges with ingenuity and expertise,” said Lawson. “Unfortunately,
the cost of college has increased significantly in the last decade and for many
Americans, this avenue to a brighter future has become unaffordable. Reducing
student debt will help increase economic activity and provide our nation’s
students with the relief and opportunity they deserve.”
Background on the major provisions of the bill:
Refinancing for Loans Disbursed at Higher Rates: Allows for
refinancing of all public, federal student loans for which the first
disbursement was made before July 1, 2010 at half a percentage point higher
than the 10-year treasury note interest rate.
Updated Interest Rate Formula: Modification of the current
interest rate formula for all future public, federal student loans at half a
percentage point higher than the 10-year treasury note interest rate.
Elimination of Origination Fees: Fees assessed when student
loans are disbursed contribute to burgeoning student loan debt and are
considered by many, as a tax on students aiming to fund their higher education
and seeking to improve earnings potential.
Tax Relief for Debt Forgiveness: The IRS currently taxes
federal student loan amounts that are forgiven through income-based repayment
plans. This often leaves borrowers with a significant tax bill at the end of
their 10 or 20-year or various repayment periods.