Exam - Proposed Bill to Change How Students Repay Loans

Feb 19, 2016

  In late January, Missouri House Rep. Kip Kendrick filed his first bill of this year’s state legislative session. Kendrick’s bill, the Student Debt Relief Act, would give Missouri college graduates the ability to refinance any student loans after graduation.

“Currently there are zero options to refinance student loans in the state of Missouri. So it’s about providing graduates and individuals working an option to be able to refinance and to lower rates, but then also to really make sure that the repayment issue is addressed,” Kendrick said.

Missouri House Rep. Kip Kendrick
Credit Kip Kendrick / Twitter

  According to Kendrick, students graduating from college sometimes have loans from multiple sources. The proposed bill will allow students to consolidate those loans into one and then refinance them at a lower interest rate.

In addition to lowering interest rates, the bill would also help students repay their loans.

“I think what we’re witnessing right now is more of a repayment crisis. Students are required to repay the bulk of their loans when their earnings are the least, job stability is the least stable,” Kendrick said.        

Under the act, the time allotted for students to repay their loans would increase from 10 years to 20 or 30. Student would still have the option of paying off their loans in 10 years. 

“The reason why I extended it to 20 instead of 10 is because, currently the current repayment structure requires lenders to repay the bulk of their loans right after graduation. It’s not uncommon for [students] to spend six months to maybe even a year to find that first job, and it’s not going to pay nearly as high as something where they’ve been working for 10 to 15 years at a job. By extending the repayment period and lowering interest rates, you’re helping them save money,” Kendrick said.

Although this bill is set up to allow students to repay their loans, there are restrictions as to who actually is eligible for the new payment plans.

"You’ll have to be a Missouri resident. You will have to have graduated with an associate’s degree or higher, and you will have had to made your first payment on the original loan,” Kendrick said.

According to Kendrick, these requirements would reduce the loan rate for the state and would provide students with a lower interest rate.

“Recent US treasury data shows that ninety percent of people defaulting on their student loans never graduated and typically hold fifteen hours or less of college credit. A smaller subset in a study in Iowa showed that sixty percent of those defaulting never even made their first payment,” he said.

Kendrick says this bill will not only help students, it will also help the economy in the long run.

“Talking with students and recent graduates and young professionals, I kept hearing the issue of student debt coming up over and over again. We have to be aware that we are diminishing the purchasing power of an entire generation and that’s going to really weigh down the economy in the future if we don’t address student debt today,” he said.

Currently the bill has yet to be assigned to a committee, but Kendrick is optimistic that the bill will receive a hearing.

“It’s not a partisan bill. It’s not a partisan issue. I make clear of that. I make certain that this bill addresses the real issue and that’s the student debt,” Kendrick said.