Bill Overview
Title: LOAN Act of 2022
Description: 2022 This bill revises interest rates and repayment plans for federal student loans. Specifically, the bill directs the Department of Education (ED) to set the interest rate on federal student loans made on or after July 1, 2022, at 0% and replace the interest with a one-time financing fee. Further, the bill permits ED to credit or refund borrowers who pay the balance of their loan earlier than required by their repayment plan with the amount of the financing fee. In addition, the bill establishes an income-dependent education assistance repayment plan as the default repayment plan for federal student loans. A borrower may select either this new plan or a 10-year fixed repayment plan. ED must calculate annual repayment amounts and provide annual statements to borrowers. The Department of the Treasury must transmit tax information to ED as necessary to determine a borrower's repayment obligations and financing fee adjustments.
Sponsors: Rep. Luria, Elaine G. [D-VA-2]
Target Audience
Population: people with federal student loans
Estimated Size: 45000000
- The bill affects all individuals with federal student loans issued on or after July 1, 2022.
- It introduces a 0% interest rate on these loans, impacting anyone subject to accruing interest over the loan's life.
- The enactment of income-dependent repayment plans as a default will affect borrowers who might have opted for different plans under previous regulations.
- The use of tax information to determine repayment obligations indicates that borrowers will need to comply with additional data sharing.
Reasoning
- The LOAN Act impacts individuals with federal student loans made on or after July 1, 2022, meaning many current college students or recent graduates might be affected.
- The commonality score reflects how typical the situation is within the population being reached by the policy, where a score of 1 indicates a very rare scenario and 20 indicates commonality.
- We need to consider different perspectives, including those who benefit slightly, those who benefit significantly, and those without impact due to not having federal loans or those exceeding the income-based repayment threshold.
- This simulation includes people with different loan sizes, educational stages, and career trajectories.
Simulated Interviews
grad student (New York, NY)
Age: 23 | Gender: female
Wellbeing Before Policy: 6
Duration of Impact: 20.0 years
Commonness: 10/20
Statement of Opinion:
- The 0% interest rate is a relief. It makes planning for post-graduation financially less stressful.
- Having a fixed financing fee instead of sustained interest gives a clearer picture of repayment obligations.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 6 |
| Year 2 | 8 | 6 |
| Year 3 | 8 | 6 |
| Year 5 | 9 | 6 |
| Year 10 | 9 | 6 |
| Year 20 | 10 | 7 |
software engineer (Dallas, TX)
Age: 30 | Gender: male
Wellbeing Before Policy: 7
Duration of Impact: 10.0 years
Commonness: 15/20
Statement of Opinion:
- 0% interest makes federal loans manageable though private loans remain a burden.
- Prefers simpler fixed plans but finds income-based plans helpful due to fluctuating income in tech jobs.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 7 |
| Year 2 | 8 | 7 |
| Year 3 | 9 | 7 |
| Year 5 | 9 | 7 |
| Year 10 | 9 | 7 |
| Year 20 | 9 | 8 |
nurse (Miami, FL)
Age: 26 | Gender: female
Wellbeing Before Policy: 5
Duration of Impact: 0.0 years
Commonness: 20/20
Statement of Opinion:
- Policy doesn't help directly but sets a positive precedent for future reform.
- Focus should remain on broader student debt relief plans.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 5 | 5 |
| Year 2 | 5 | 5 |
| Year 3 | 5 | 5 |
| Year 5 | 5 | 5 |
| Year 10 | 5 | 5 |
| Year 20 | 6 | 6 |
public school teacher (Chicago, IL)
Age: 35 | Gender: male
Wellbeing Before Policy: 6
Duration of Impact: 0.0 years
Commonness: 18/20
Statement of Opinion:
- Policy has no effect on my existing loans, but will help new generations.
- Concerned about the equity in assistance for older loans.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 6 |
| Year 2 | 6 | 6 |
| Year 3 | 6 | 6 |
| Year 5 | 6 | 6 |
| Year 10 | 6 | 6 |
| Year 20 | 7 | 7 |
entrepreneur (San Francisco, CA)
Age: 40 | Gender: other
Wellbeing Before Policy: 9
Duration of Impact: 0.0 years
Commonness: 5/20
Statement of Opinion:
- I support policies reducing financial burdens on students though I have no personal stake.
- Economic impact on borrower spending post-education could invigorate the economy.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 9 | 9 |
| Year 2 | 9 | 9 |
| Year 3 | 9 | 9 |
| Year 5 | 9 | 9 |
| Year 10 | 9 | 9 |
| Year 20 | 9 | 9 |
postdoc researcher (Boston, MA)
Age: 28 | Gender: female
Wellbeing Before Policy: 5
Duration of Impact: 15.0 years
Commonness: 7/20
Statement of Opinion:
- The reduced repayment pressure will ease my financial situation, encouraging more focus on career development.
- Concerned about future funding for such policies amidst economic volatility.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 5 |
| Year 2 | 8 | 5 |
| Year 3 | 9 | 6 |
| Year 5 | 9 | 6 |
| Year 10 | 9 | 7 |
| Year 20 | 10 | 8 |
small business owner (Raleigh, NC)
Age: 50 | Gender: male
Wellbeing Before Policy: 6
Duration of Impact: 5.0 years
Commonness: 12/20
Statement of Opinion:
- Potential benefits for my children's future education costs could be significant.
- Skeptical about policy sustainability without increasing deficit.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 6 |
| Year 2 | 7 | 7 |
| Year 3 | 8 | 7 |
| Year 5 | 8 | 7 |
| Year 10 | 8 | 7 |
| Year 20 | 8 | 7 |
non-profit manager (Seattle, WA)
Age: 37 | Gender: female
Wellbeing Before Policy: 7
Duration of Impact: 0.5 years
Commonness: 8/20
Statement of Opinion:
- Though the policy benefits aren't direct, I see its potential to enable more alumni donations by reducing graduate debt.
- Redirecting saved funds to charity is appealing, assuming similar policies continue.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 7 |
| Year 2 | 8 | 7 |
| Year 3 | 8 | 7 |
| Year 5 | 8 | 8 |
| Year 10 | 9 | 8 |
| Year 20 | 9 | 8 |
performing artist (Los Angeles, CA)
Age: 29 | Gender: male
Wellbeing Before Policy: 4
Duration of Impact: 20.0 years
Commonness: 3/20
Statement of Opinion:
- Income-dependent repayment aligns well with my financial fluctuations.
- Policy's benefits could encourage more diverse career paths among students.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 4 |
| Year 2 | 7 | 5 |
| Year 3 | 8 | 6 |
| Year 5 | 8 | 6 |
| Year 10 | 9 | 6 |
| Year 20 | 9 | 7 |
undergraduate student (Atlanta, GA)
Age: 22 | Gender: female
Wellbeing Before Policy: 5
Duration of Impact: 4.0 years
Commonness: 14/20
Statement of Opinion:
- Early experience with interest-free loans shapes future expectations for borrowing.
- Family concerned about future changes to repayment plans.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 5 |
| Year 2 | 7 | 5 |
| Year 3 | 8 | 6 |
| Year 5 | 8 | 6 |
| Year 10 | 8 | 7 |
| Year 20 | 9 | 8 |
Cost Estimates
Year 1: $25000000000 (Low: $20000000000, High: $30000000000)
Year 2: $26000000000 (Low: $21000000000, High: $31000000000)
Year 3: $27000000000 (Low: $22000000000, High: $32000000000)
Year 5: $30000000000 (Low: $25000000000, High: $35000000000)
Year 10: $35000000000 (Low: $30000000000, High: $40000000000)
Year 100: $50000000000 (Low: $40000000000, High: $60000000000)
Key Considerations
- The transformation from interest-based to a fee-based structure potentially redefines revenue streams for federal student loan programs.
- There are significant administrative and compliance costs associated with implementing income-dependent repayment plans.
- The policy's effectiveness in improving borrower financial health versus cost to the federal budget needs continuous evaluation.