S.1220 - Savings Opportunity and Affordable Repayment Act (119th Congress)
Summary
S.1220, the Savings Opportunity and Affordable Repayment Act, proposes amendments to the Higher Education Act of 1965. The bill introduces a new income-contingent repayment plan, the 'Savings Opportunity and Affordable Repayment plan,' designed to make student loan repayment more manageable. This plan would cap monthly payments based on income and family size, and offer loan forgiveness after a set period of qualifying payments.
Expected Effects
The bill aims to lower the burden of student loan debt for borrowers, particularly those with lower incomes. It phases out certain existing repayment plans while introducing the new, more affordable option. This could lead to increased financial stability for individuals and potentially stimulate economic activity as borrowers have more disposable income.
Potential Benefits
- Reduced Monthly Payments: Caps payments based on income and family size, making repayment more affordable.
- Loan Forgiveness: Offers loan forgiveness after 120 or 180 qualifying monthly payments, depending on the type of loans.
- Interest Accrual Relief: Prevents the accrual of interest not covered by the monthly payment obligation.
- Simplified Repayment: Consolidates various repayment options into a more streamlined system.
- Flexibility: Allows borrowers to switch out of the plan and prepay without penalty.
Potential Disadvantages
- Complexity: The calculation of monthly payments and eligibility requirements could be complex for borrowers to understand.
- Potential for Increased Debt: Deferred principal may lead to a higher overall debt burden if not managed carefully.
- Phase-Out of Existing Plans: Some borrowers may prefer the terms of the phased-out plans (PAYE and ICR).
- Administrative Burden: Implementing and managing the new repayment plan could create administrative challenges for the Department of Education.
- Potential for Abuse: The generous terms of the plan could incentivize some borrowers to take on more debt than they can reasonably repay.
Most Disadvantaged Areas:
Constitutional Alignment
The bill's alignment with the Constitution primarily falls under the General Welfare Clause (Preamble). By aiming to improve the financial well-being of citizens burdened by student loan debt, the bill arguably promotes the general welfare. The bill does not appear to infringe upon any specific individual rights or freedoms guaranteed by the Bill of Rights.
Impact Assessment: Things You Care About ⓘ
This action has been evaluated across 19 key areas that matter to you. Scores range from 1 (highly disadvantageous) to 5 (highly beneficial).