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Dynamic Student Loan Repayment Act

Senator Warner and Senator Rubio

Legislative Summary

Nearly 15 percent of student loan borrowers will default within three years of beginning
repayment. While public concern about the ongoing student debt crisis has centered on the
crippling amount of debt held by some borrowers, a majority of defaults are by borrowers with
a more manageable level of debt. Our current system turns these manageable debt levels into
payment burdens that can be crippling and lead to default. This can be ruinous for the
borrower and expensive for the government.
Income-based repayment programs exist, but many students don't utilize them because the
system is so complicated. The Dynamic Student Loan Repayment Act would help more
borrowers utilize these programs by doing four things:

- Simplifies and consolidates. Replaces our complicated array of loans, subsidies,
deferments, forbearances, and repayment options with a single loan repaid through
simplified and improved income-based repayment.

- Automatically keeps payments affordable. A borrower would pay an affordable
percentage of his or her income until the loan is repaid or the time limit is reached.
Borrowers pay more when they're doing well and are protected during periods of
unemployment or low earnings.
- Makes income-based repayment more fiscally responsible. Tiers loan forgiveness so
that it provides a safety net for responsible borrowers who unexpectedly find their loan
balances permanently unaffordable, while minimizing incentives for individuals to
engage in unnecessarily risky borrowing.
- Strong borrower protections. Interest would not compound during repayment, allowing
the borrower to make progress on the principal.

The bill does include a forbearance option for cases of extreme economic hardship.

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