State House Sound Bites

Capitol reporter Mary Wilson covers Pennsylvania politics and issues at the Pennsylvania state capitol.

A plan to make student debt a lighter load

Written by Mary Wilson, Capitol Bureau Chief | Sep 10, 2013 7:21 PM
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Photo by G.R. Wilson


Imagine a student loan program in which there's no interest, the payments are deferred for three years, and they arrive as a percentage of the graduate's income.

The proposal comes from Democratic state Senator Daylin Leach of Montgomery County, who is hoping to help college graduates hobbled by student debt.

The elimination of interest is a key piece of the puzzle. "The interest doesn't keep the debt growing, and you don't keep treading water for year after year - making payments without decreasing the debt," Leach said. Here, if you borrow $100,000 dollars, you pay back $100,000."

He acknowledges the hefty start-up cost of such a program.

"We need some seed money," Leach said. "Eventually this becomes a self-sustaining program and whatever tax is imposed goes away. But we need some money to start up the program."

Other states have proposed borrowing money for such programs. Leach suggests a severance tax on the natural gas drilling industry. Gov. Corbett opposes such a tax, and signed into law an impact fee on drillers last year instead.

"He won't be governor forever," Leach quipped. But setting aside questions of start-up costs, the sustainability of the fund his proposed program would create is an unresolved question. A similar fund has been proposed in Oregon and will be piloted in the next year. Scholars have suggested such funds can't be self-sustaining if the only students they attract enter low-paying careers.

Published in State House Sound Bites

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Comments: 1

  • Marie Cuevas img 2014-01-04 08:37

    An increase of interest rates on student loans could mean that students could be paying thousands of dollars more on interest over the lifetime of loans. For many students, consolidating student loans using programs such as the William D. Ford Direct Loan Program can help lock in lower interest rates for their loans.

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