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D.C. residents could have student debt forgiven under council proposal

D.C. Council member David Grosso (I-At Large) plans to introduce legislation Tuesday to create a city-wide student loan forgiveness program. (Jahi Chikwendiu/The Washington Post)
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The nation’s capital is one of the most educated but also most indebted regions of the country, with one in five residents shouldering student loans. That debt load is an added burden for residents already struggling with the city’s high cost of living. New legislation seeks to ease the strain.

D.C. Council member David Grosso (I-At Large) introduced a bill Tuesday to create a student loan forgiveness program for District residents. He is proposing the city cover up to five years of payments for individuals earning less than $75,000 a year or married couples with a combined income of less than $95,000.

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To qualify, borrowers would have to be enrolled in one of the federal government’s income-driven repayment plans that peg monthly student loan bills to a percentage of a person’s earnings. They could apply for the benefit within two years of leaving school as a full- or part-time student.

“I’ve heard from teachers about how hard it is for them to make ends meet because they’re carrying this debt,” said Grosso, chairman of the Education Committee. “This is something we need to address.”

Grosso has not sketched out cost projections for the program but said requiring applicants to be enrolled in an income-driven repayment plan could hold the reins on the expense. Most of those plans cap loan payments at about 10 percent of a person’s discretionary income, which is defined as the difference between annual take-home pay and 150 percent of the federal poverty line ($18,090 for an individual in 2017). That means for someone with $40,000 in take-home income, annual loan payments would be capped at about $2,200 under the latest federal income-driven plan.

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Payment amounts in those plans rise alongside pay increases, but the five-year timetable in Grosso’s proposal could serve as another way to limit the cost of the debt forgiveness program. Still, if a large number of residents sign up, program costs could run high.

Grosso said his bill instructs the Office of the State Superintendent of Education to create additional measures as needed to ensure the program is sustainable. In drafting the legislation, the council member consulted with the Consumer Financial Protection Bureau, a federal agency that has tracked similar proposals in other jurisdictions.

Some cities and states are stepping in to help residents get a handle on their education debt as 44 million people now hold a total of $1.3 trillion in student loans. Memphis, for instance, kicks in $50 a month toward the student loan payments of city employees while the state of New York covers debt payment for up to two years after residents graduate. The goal of these programs is to attract and retain an educated workforce, one that can establish a strong financial footing.

“We’re making a big push for day-care workers to go back to school. . . . I’m trying to make sure they know that we’ve got their back when they complete their education, so they can continue to live in the District regardless of the debt they might owe,” Grosso said.

The Department of Education reports that the District has the highest concentration of debtors in the nation. Residents in low-income neighborhoods with small student loan balances are having a harder time repaying than people in wealthy areas carrying six-figure debt, according to a study from the Center for American Progress and the Washington Center for Equitable Growth.

Researchers found in 2015 that east of the Anacostia River, where the median household income hovers at about $30,000 a year, residents with student loans had balances that were either below the national average of $24,271 or 10 percent to 25 percent higher. Yet they were three times as likely to be at least nine months behind on loan payments than people just across the river with twice as much debt.

Given Grosso’s success in establishing a student loan ombudsman in the city last year, his legislation stands a fair chance in the council. The city already has a loan forgiveness program for health-care professionals working in underserved areas.