coins spilling from jar and word student debt Alexander's proposal would compel employers todeduct student loan payments from employee paychecks based on oneof two methods. (Photo: Shutterstock)

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Whether you're keeping up with your student loan payments ornot, you soon might not have a choice—if a new plan touted by Sen.Lamar Alexander, R-TN, chairman of the Senate Health, Education,Labor and Pensions Committee, moves forward.

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Alexander's proposal would compel employers to deduct studentloan payments from employee paychecks based on one of two methods,according to a CNBC report: “one in which borrowers' monthly billsare capped at 10 percent of their discretionary income and anotherthat spreads their payments out over a decade.” The change couldaffect as many as 40 million people.

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A report from the Inspector General's office atthe U.S. Department of Education found that Federal Student Aid had“not established policies and procedures that provided reasonableassurance that the risk of servicer noncompliance with requirementsfor servicing federally held student loans was mitigated,” andindeed failed to track identified instances of noncompliance, nordid it hold servicers accountable for failing to comply withfederal loan servicing requirements.

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And while there are plenty of reasons to overhaul the studentloan system, Marketwatch reports that Alexander's proposal would chopdown the current nine repayment plans that are currently availableto borrowers into two, but while this “streamlined” system would“[guarantee] that borrowers would never have to pay more than 10percent of their income that is not needed for necessities,” itwould also take away the chance for borrowers to manage their ownmoney.

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In addition, the option already exists for federal student loanborrowers to repay those loans as a percentage of their income, butthe system is so confusing and conflicted that it's tough forpeople even to learn that the option exists.

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And consumer advocates just aren't having it. “It's a bad idea,”Persis Yu, the director of the Student Loan Borrower AssistanceProject at the National Consumer Law Center, is quoted saying inthe report. Yu added, “The bottom line is it would force borrowersto prioritize their student loan payments above any other kind ofexpense they have.”

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Try telling that to a hospital or doctor whose bills are on theverge of going into collection.

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Yu also said in the report that under that plan, students couldsuffer because of a financial emergency, or because they haveuneven income, necessitating having to save extra money when theycan get it against times when their pay may be slim to none.

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CNBC says that the National Consumer Law Centerpoints out in a report that “For borrowers with tight budgetsthat need to be navigated on a monthly basis, forced automaticpayroll withholding may mean diverting money away from rent, heator food in order to pay their student loans.”

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In addition, Barmak Nassirian, director of federal relations atthe American Association of State Colleges and Universities, isquoted calling the proposal a “detour from realreform.” Nassirian adds, “This is a system rife with fraud andpredatory lending,” and further says that some borrowers could havea problem with their employer knowing the details of theirdebt.

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READ MORE:

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IRS opens door for 401(k) sponsors to addressstudent loan debt

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Student loan debt harms retirement, saysAARP

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10 states with the highest average student loandebt

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