Student loan reform key to building a new middle class


The student loan crisis is fast becoming the next financial bubble. The CARES Act provided temporary relief by suspending student loan payments until September. Further relief could come in the upcoming COVID legislation, but these are only temporary measures.

In a generation, funding for post-secondary education has shifted from state and federal tax support to individual student loans – a shift that has now grown to $ 1.6 trillion in student loan debt, higher than the car and credit card debt, and exceeded only by mortgage on real estate. debt. In Illinois, General Assembly support for state universities has dropped from $ 11 for every dollar paid by students to less than $ 1 for every student dollar.

The political fear of the third rail (taxes) created an individual tax in the form of student loans – and a looming financial crisis larger than the 2008 financial crisis. All current and proposed “student loan solutions” are nibbling the edges of the world. issue, have income caps, only cover public colleges and universities, do not cover private colleges and universities, do not cover private student loans (20% of total), or do not meet the need for a period transition to increase state and federal funding for education.

The Center for Education and Training Reform was established as a 501 (c) 4 non-profit corporation to address this and other education and training issues. As a first project, the CETR launched a popular campaign to turn student loan payments into federal tax credits with the passage of the Student Tax OPTION, or STOP, Act.

It is a non-partisan campaign to get members of Congress and congressional candidates to sign a pledge to pass the STOP law. The STOP approach provides a period of gradual change that keeps the current system in place as the process of general tax increases by state and federal governments strives to reduce the need for the student loan system. In the process, a new middle class is created that will inject $ 17.5 billion ($ 393 in average loan repayment times 44.7 million) of disposable income into the economy each month for years to come. Faced with the need to accelerate the economic recovery, this new middle class will drive the recovery by doing what student debt has prevented them from doing: buy cars, get married, buy houses and start a family.

The STOP law contains the following provisions:

1. All student loan payments (principal, interest, and fees) will be allowed as individual federal income tax credits in the year paid. Currently, only interest paid on student loans is allowed as a tax deduction.

2. Similar student loan payments made in the previous five years are aggregated and determined as federal tax credits (clawback provision).

3. All unused credits are carried over for up to 10 years.

4. All Social Security payments are exempt from student loan garnishment. Currently, over 100,000 loan holders have their Social Security checks seized to pay off student loans.

All current members of Congress and candidates for Congress are invited to sign a pledge to pass the STOP law. With 44.7 million student loan holders, including 8.9 million loan holders over age 50, there is significant motivation for one in four American adults and their supporters who owe student loans to vote for members. of Congress and candidates who support the law. As in the California Proposal Method, if the overwhelming proportion of student loan holders supports this campaign, the creation of a new middle class can be assured. If you have or know someone who has a student loan, help make this effort go viral by raising awareness of the effort.

For more information:

John Frana of Rockford is president of the Center for Education and Training Reform.


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