OWENSBORO, Ky. (WEHT) While college students are focusing on upcoming fall semester finals, Kentucky Sen. Rand Paul is proposing a new way for them to pay off their student debt.
It includes allowing students and their parents to use money from retirement plans.
“If this bill were to pass, it would be the most dramatic thing to happen to helping kids pay for their education,” says Sen. Paul.
His Higher Education Loan Payment and Enhanced Retirement, or HELPER Act, allows people to take up to $5,250 out of retirement plans to pay for college or student loan debt, tax and penalty free. He says it can help students and parents pay down debt quicker, and lower the total Americans owe.
“There’s bipartisan worry for how big the student loan bubble is. $1.5 trillion is a lot of money and with those dire predictions that as much as 40% could lead to bankruptcy or default,” he says.
Under the plan, if a student and two parents each paid the maximum amount, they can pay down $15,750 in a year.
“It’s their money, so if they’re going to have it at one point anyway, they should be able to draw it out if they are struggling or are in need to pay their student loans now,” says Kate Baker, a sophomore at Brescia University.
While Senator Paul says the bill can do a lot of good, Kentucky Wesleyan’s Vice President of Financial Aid and Admissions Matthew Ruark says it’s an interesting idea, but he worries that it doesn’t go far enough.
“A lot of the student loan debt that we have is graduate level debt for students after they finish their degree to go on to grad school,” he says. Ruark also says more can be done to help families who don’t have plans or haven’t thought about retirement yet.
“We have a tremendous number of students who have a major need, identified through the FAFSA process, that they need assistance. They’re not going to benefit through this process because their families simply don’t have the dollars in retirement,” Ruark adds.
(This story was originally published on December 3, 2019)