Sen. Paul Sponsoring Bill to Reduce Student Loan Debt
U.S. Senator Rand Paul of Kentucky wants to combat the rising debt load of many college students by allowing families to use retirement savings to pay off their loans.
The Bowling Green Republican is sponsoring legislation that would let students dip into retirement accounts to help pay college tuition or make monthly debt payments. Individuals could take up to $5,250 each year from their 401(k) or IRA, tax and penalty free, and their parents could divert thousands of dollars more.
Paul’s bill is called the Higher Education Loan Repayment and Enhanced Retirement Act, or HELPER. In a conference call with reporters on Tuesday, Paul said his bill is more fiscally responsible than other proposals by Democrats.
“We think this is a responsible way to look at this in comparison to some of the other proposals out there just to make college free, which I think, begs the question what does that actually mean and who really pays."
Some Democratic presidential contenders have proposed eliminating tuition at all public universities or providing two years of free community college.
Paul said his bill hasn’t been scored yet by the Congressional Budget Office to determine its fiscal impact. The incentive for families to divert more pre-tax money could result in less money flowing to the treasury.
On average, last year’s graduates owed about $29,200 each, and some 40 percent are at risk of defaulting on their loans.
Americans owe a total of about $1.5 trillion in student loans, which is more than twice the total of a decade ago.