Dive Brief:
- With student debt topping $1.2 trillion, officials at the state and federal levels are proposing ways to scale back the burden.
- At the federal level, the Obama administration is poised to implement an expanded "Pay As You Earn" student loan repayment program that caps a borrower’s monthly bills at 10% of discretionary income for about 6 million additional student loan holders.
- In New Jersey, State Rep. John Burzichelli wants to create a lottery for student loan holders — the winner would have his or her debt paid off and an outside vendor would collect 25% of ticket sales.
Dive Insight:
Both proposals aim to limit the number of former students who default on their debt once they go into repayment. The Obama administration is hoping to limit the number of students graduating or leaving school at risk of defaulting on their debt by regulating schools on the front end. The Education Department’s gainful employment regulations, which took effect July 1, could force the closure of 1,400 programs that will no longer be eligible for federal student aid based on the default rates of their graduates. While the rule has survived two court challenges, it will be further tested in court on appeal and may be stripped of its teeth by the Republican budget in Congress.