(CNBC) – Student loan borrowers would automatically deduct their monthly bills from their paycheck if a Republican-backed proposal is allowed.
Sen. Lamar Alexander, R-Tenn., Head of the Senate Health, Education, Labor and Pension Committee, set out the details of the comprehensive audit of the student loan system in a speech earlier this month. The changes can affect about 40 million people.
Average upgrade debt is currently around $ 30,000, up from $ 10,000 in the early 1990s. The country's outstanding student loan balance is expected to swell to $ 2 trillion by 2022.
Currently, borrowers are in line with companies managing federal student loan programs, and they have about 14 different ways to repay educational debt.
Under Alexander's proposal, there would be only two repayment routes: one in which the borrower's monthly bills are truncated to 10 percent of their discretionary income and another that spreads their payments over a decade. Employers would be responsible for taking funds from their paychecks and sending them to the government. (Student borrowers can of course set up automatic payments with their lenders. They also get a discount on the interest rate to do so.)
"I think this proposal will probably be allowed, after some tweaks," said Mark Kantrowitz, a student loan expert .
Bill Clark | CQ Roll Call | Getty Images
Sen. Lamar Alexander, R-Tenn.
Lamar said his proposal would streamline the student loan system and protect borrowers. "It makes sure that if it didn't make money, it wouldn't be a guilty money and it wouldn't reflect negatively on a borrower's credit," he said.
The plan quickly criticized crime representatives, who called it "compulsory salary Garnishment."
"For borrowers with tight budgets who need to be navigated on a monthly basis, forced automatic payment of wages may mean that money is transferred from rent, heat or Food to pay their student loans, says a report by the National Consumer Court.
Critics of the proposal say that payments should always be voluntary and that people need flexibility to standardize their student loans. One in five borrowers are in default or default on their student loans
When a borrower defaults on his federal student loans, Kantrowitz said that the government today can garner up to 15 percent of their salary, anyway, which is more than 10 percent that will be taken out under Alexander's proposal.
"Many borrowers who have sufficient income to repay their debts but only have trouble managing the money "There is the potential for much elegance in designing student loan repayments through labor dispute."
But Barmak Nassirian, director of federal relations at the American Association of State Colleges and Universities, called the proposal a detour from real reform . "
" This is a system that comes with fraud and predators, "he said. Some borrowers may also have a problem, he added, with the employer knowing the details of their debts.