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09/19/2019 02:46 PM
Pennsylvania State Senate
https://www.legis.state.pa.us/cfdocs/Legis/CSM/showMemoPublic.cfm?chamber=S&SPick=20190&cosponId=28900
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Senate of Pennsylvania
Session of 2019 - 2020 Regular Session

MEMORANDUM

Posted: March 20, 2019 09:16 AM
From: Senator Vincent J. Hughes and Sen. Katie J. Muth, Sen. Lindsey M. Williams
To: All Senate members
Subject: Pennsylvania Student Higher Education Lending Protection (PA Student HELP) Act
 
In the near future, we plan on introducing legislation to comprehensively address the student debt crisis facing countless individuals and families throughout the Commonwealth.

The statistics are staggering. Nationwide, approximately 45 million people owe more than $1.5 trillion in federal student loan debt. In Pennsylvania, more than 1.8 million residents carry student loan debt. The average college graduate with a degree from a Pennsylvania school carried more than $36,000 in debt in 2017, making Pennsylvania first in the nation for student loan debt per capita.

Our legislation, known as the Pennsylvania Student Higher Education Lending Protection (PA Student HELP) Act, aims to address student debt at multiple levels: debt reduction, increased borrower protections and enhanced data collection.

Debt Reduction

This legislation takes a three-pronged approach to reducing existing student loan debt by allowing students to refinance high-interest student loan debt, provides tax credits for those who have outstanding student loans and incentivize employers to help pay down student loan debt of their employees.

First, to assist individuals who are out of school and are carrying the burden of student loan debt, our legislation proposes up to a $1 billion bond to create a student debt refinancing program in the commonwealth. The revenues from the bond would be placed into an account at the Pennsylvania Higher Education Assistance Agency (PHEAA) to be used to assist individuals who are currently paying high interest rates on student loan debt by refinancing those loans at a lower, fixed rate. By reducing the interest rate and providing more borrower-friendly terms, individuals can reduce their payment and the total amount of debt repaid over time. This program is especially helpful for individuals who may be carrying high interest, private student loan debt.

Second, our legislation would allow individuals paying off student loans to apply for a $500 tax credit against the Pennsylvania personal income tax for payments made on student loans during the tax year. The amount of tax credits authorized would be capped at a $10 million tax credit program and would provide relief for approximately 20,000 borrowers.

Finally, the proposal encourages employers to help employees who are saving for college for a child and employees who are currently repaying their student debt by enabling employers to make contributions to an employee’s 529 account; make payments to an employee’s outstanding student loan debt; or apply a cash equivalent of unused carryover paid time off to an employee’s outstanding student loans. Our legislation would exempt these payments or contributions from state and local taxation for both the employer and the employee.

Borrower Protections

In addition to reducing debt, our legislation would protect borrowers by mandating pre-loan counseling before incurring debt and require institutions of higher education to be transparent in the costs of attending their institution. Students and borrowers would be provided with important information, including the total cost of attendance, an approximation of the actual amount of financial aid that a student would receive over the course of four years, and student loan rates, repayment plans, default rates and actual monthly payments when an individual’s student loans become due.

To further protect borrowers, our legislation creates a Student Loan Ombudsman to be an advocate for borrowers and help them navigate student debt issues with an institution of higher education, the state or federal government, and private lending institutions.

Data Collection

Finally, all post-secondary educational institutions will be required to compile information on student loan debt incurred by students on an annual basis and submit the information to the Department of Education for purposes of tracking whether student loan debt is increasing or decreasing annually.

With respect to private student loans, the Department of Banking and Securities would be required to compile information on interest rates, loan term, and repayment plans offered by private student loan lenders. The information collected on private student loan lenders would be available to advise potential borrowers on the private lending institutions that offer loans with terms most favorable to the borrower.

We believe it is past time to address the student loan debt crisis that is hitting Pennsylvania’s residents at a disproportionate rate.

Please join us in sponsoring this legislation.



Introduced as SB400