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Two Illinois lawmakers want to amend financial protection law governing student loan repayments to eliminate what they say is a policy that discourages service members from consolidating or refinancing pre-service loans.
Sen. Dick Durbin, the Senate assistant majority leader, and Rep. Tammy Duckworth, a disabled Iraq War veteran who still serves in the Illinois National Guard, introduced legislation Tuesday to change the Servicemembers’ Civil Relief Act to give service members financial alternatives denied under current law.
The Servicemember Student Loan Affordability Act, S 1399 in the Senate and HR 2859 in the House, would allow troops to consolidate or refinance pre-service student loans without having to give up the 6 percent interest rate cap imposed under federal law for debts incurred before entering the military. Under current law, the 6 percent rate cap no longer applies after these actions are taken because the original loan is repaid.
Loan consolidation is a requirement to participate in a federal loan forgiveness program that rewards people who have made regular payments for at least 10 years, the two lawmakers said. The Public Service Loan Forgiveness Program could help service members with Perkins or Federal Family Education loans.
The average student loan debt for service members is $25,000, the lawmakers said.
Durbin said service members are missing out on the opportunity of “historically low interest rates” that could “save borrowers thousands of dollars over the life of the loan.” He called the bill a “common sense” fix.
The services have student loan repayment bonus programs that can provide up to $65,000 as a recruiting incentive. These are discretionary bonuses, and payments generally are limited to $1,500 for each year of service.