A new report outlines the benefits of legislation introduced by Rep. Tom Petri (R-Wis.) to help students manage their federal student loans.
The American Enterprise Institute concluded that students would be better able to finance college costs through income-sharing agreements proposed under Petri’s bill. The agreements would provide private financing for education in exchange for a percentage of the student’s future income for a set amount of time.
“AEI’s report brings a lot to the discussion about how to finance and repay a college education,” Petri, a senior member of the House Education and the Workforce Committee, said. “The report will certainly be helpful as Congress proceeds with a reauthorization of the Higher Education Act.”
Petri and Rep. Jared Polis (D-Colo.) introduced the bipartisan Earnings Contingent Education Loans Act in December 2012.
Under the measure, interest on student loans would not compound during repayment and would be capped at 50 percent of the loan balance upon graduation.
“Students would have to repay what they borrow, but they wouldn’t face interest spiraling out of control just because of a temporary bout of unemployment,” Petri said.
The AEI report found that a simplified income-based repayment system would help manage interactions between federal student loans and pay-it-forward arrangements.
The measure would be a great “starting point” to help students manage their federal student loans, according to the report.