Will the next drag on America's economy tunn out to be student loans? America's student loan debt burden hit $1.56 trillion, more than any other kind of household debt except for mortgages, according to StudentLoanHero.com.

Student loans are one of the most pervasive debts. The Department of Education offers assistance programs, but participants who don't follow loan servicer instructions to the letter can rack up unanticipated interest charges or lose debt forgiveness.

Help for current and future students may come from Congress, thanks to the recently reintroduced Debt-Free College Act. The bill's sponsor, Senator Brian Schatz (D-HI), aims to improve state funding for public universities through federal incentives. The proposed bill would set up federal matching dollars for state spending programs to fill the unmet financial needs of college students.

Not Just Tuition This Time

The Debt-Free College Act goes a step further than previous bills by making aid eligible for all college costs, not just tuition. According to data from the College Board's Trends in College Pricing for 2018, students at four-year public in-state schools paid more in room and board costs ($11,140) than they did for tuition ($10,230).

The goal is to create a combined state-federal safety net to make college affordable for everyone without the need for student loans, but how would the Debt-Free College Act work in practice?

State participation is the linchpin. States that receive grants must accept responsibilities, like capping tuition and fees for state universities within certain inflationary limits and maintaining minimum support levels. But states typically don't like ceding flexibility to federal programs, especially with limited control over the corresponding federal funds.

If a majority of states refuse to participate, the program would collapse. Compromises would be required over time to get greater state compliance.

If enacted, the Debt-Free College Act won't affect private universities. You'll have a debt-free option, but that may not be at the university of your choice.

Note that debt-free college is not the same as free college. The bill is focused on filling unmet needs, not covering all costs — the bill would give priority to Pell Grant recipients. The "expected family contribution" would also still be in effect, financial aid packages would still play a role, and students would still have to fill out the FAFSA form.

Hey, What About Us?

The Debt-Free College Act is not without flaws, starting with how to pay for the estimated $80.1 billion for the first year of federal-state partnerships — not to mention future effects of inflation and soaring college tuitions.

In addition, the Debt-Free College Act won't do much for graduates that share the majority of the current debt burden. Progressives have kicked around the idea of cancelling student loan debt, but it's unrealistic to expect Congress to deal with both past and future student loan debts in the same session, and enthusiasm for student loan debt reform may be dampened without assistance for current debtors.

Relief for existing student debtors might be an easier economic sell. A 2018 report published by the Levy Economics Institute of Bard College determined that wiping away college debt ($1.4 trillion at the time of the report) would boost GDP between $86 billion and $108 billion annually for the next ten years. Given the double-digit default rate for student loans, that's not a bad economic payback.

With a Republican-controlled Senate and White House, it's unlikely that the bill will pass, and borrowers should expect any final version that does come out of the 116th Congress to be heavily watered-down.

The Takeaway

With the odds of passage low, borrowers and students shouldn't wait around for assistance to magically arrive.

Take all steps possible to reduce potential education costs. Consider grants, scholarships, work-study programs, and paid internships.

If you're already struggling with student loan debt, review options like income-based repayment plans on the Federal Student Aid website. Loan consolidation is another choice, if you can get favorable terms that make your payments more manageable.

Minimize your student loan debt while you're in school. Afterward, set up a manageable monthly student loan payment plan and make at least the minimum payment every month. We realize that's far more difficult than it sounds, but it's important to face your situation head on. Waiting on Congress for help is just above lottery tickets on the list of bad financial strategies.

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