Illinois introduces interest-free college tuition bill
Imagine if you took out $30,000 for college and that’s all you had to pay back.
For most student loan borrowers, that’s not the case. Due to compound interest, that $30,000 can easily turn into $40, $45, $50,000 or more by the time the graduate has paid it off.
The burden of student loan interest
Many borrowers end up paying thousands of dollars in interest on top of their student loan balance over the life of the loan, particularly if the borrower has to postpone or reduce payments during repayment due to economic hardship, attending graduate school, or unemployment.
Student loan interest that has built up over time can also add months or years to your repayment term because of the way compound interest works–interest is added to the balance, then you’re charged interest on that balance, so you pay interest on the interest.
This puts student loan borrowers, particularly those struggling to repay their loans, into an even deeper hole.
Pay only what you borrow for college
But an Illinois Assemblymember, Rep. Jay Hoffman, wants to change that. That’s why he’s introduced a bill that could lead to the state giving interest-free loans to students seeking a college education.
If passed, House Bill 5323 would direct the Illinois Student Assistance Commission to create and study a pay-it-forward type of loan program, under which students could attend community colleges or state universities tuition-free.
As part of the program, students would have to sign a contract to repay the cost of tuition to the state from a portion of their adjusted gross income after graduation. That means they’d only pay the actual tuition cost–they would not pay interest on top of this.
New bill aims to reduce student loan debt
The bill’s co-sponsor, Rep. Jack Franks, D-Woodstock, says that the bill will help the economy and allow college graduates to thrive without the burden of excessive student debt.
The costs of higher education have risen far faster than wages in recent years. This has put many young people into a ‘catch-22’-type situation, where they either assume a large amount of debt to attend a university or their future earning potential is inhibited due to their lack of a college degree.
I believe this is an unacceptable trade-off and that new ideas are clearly called for.”
College affordability still key issue
We love seeing innovative solutions and programs like this to address the student debt issue. It’s certainly a step in the right direction.
While colleges don’t appear to be reducing their prices anytime soon, there are still ways to make college more affordable. Check out our tips on getting the most financial aid, contact us, or call us at 1-888-234-3907 for a free financial aid and student loan consultation.