Los Angeles Congresswoman Karen Bass has been pushing for student loan debt relief. Tuesday on Capitol Hill, she and two other House Democrats turned to financial guru Suze Orman to champion their cause. Orman had some ideas of her own.
Bass has introduced a bill that gives borrowers a break after they’ve paid back federal student loans for ten years — if they've kept current on payments. "After ten years," Bass said, "that loan would be forgiven up to $45,000."
The bill would also cap interest rates for federal loans at the current 3.4 percent, rather than wait for an annual vote from Congress. Unless Congress acts by July 1st, the rate will double. The Bass bill would also suspend interest rates while the borrower is unemployed.
Orman told a room full of young Congressional staffers that the issue of student loan debt keeps showing up on her weekly financial advice show on MSNBC.
She wasn’t shy about suggesting an amendment to the Bass bill, suggesting if a former student is unemployed and unable to make loan payments, that should not be reported to a credit bureau: "That ruins your credit score, [which] makes it impossible for you to get a job so that you can have money to pay back your student loans!"
Orman said the bigger problem is private student loans that carry much higher interest rates. She said car loans and mortgages are offered by banks at lower rates than student loans. Bass’ bill would allow some private student loans to convert to federal loans.
Attending the lecture was Congressional intern Miguel Carranza, a UC Santa Barbara grad who says he has $59,000 of student debt. More than half is in private loans with an interest rate of 9.8 percent. Carranza, who's currently in default, says he doesn't know what to do, admitting it sometimes keeps him up at night.
Unlike credit card or other debt, student loans cannot be discharged in a bankruptcy. A bill authored by Indiana Democrat Steve Cohen and co-sponsored by California Democratic Congressman George Miller would treat private student loans like any other debt.
But there were only Democrats at the student loan event. No hearing on the matter has been scheduled by House Republican leaders. Bass admits it may take “several sessions” — and a few more Democrats in the House — before the measures advance.
In the meantime, Orman advised: pay your student loans before any other debt on your plate.