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Easing grads’ loan burdens

It’s an election year, and Democrats are loudly decrying the cost of higher education and demanding that the government spend more to cut student debt. The Senate last week rejected one of their less-sensible ideas. But there are better ones lawmakers should embrace.

The Senate halted a bill from Sen. Elizabeth Warren, D-Mass., that would have allowed students with old government loans to refinance them. Warren’s plan had some appeal, and Democrats will no doubt harp on its rejection in the coming campaign. If the government is to levy a large amount to make higher education affordable, lowering rates on old student loans is far from the best way.

While he endorsed Warren’s plan, President Barack Obama also brought attention to a much worthier effort: fixing the government’s income-based repayment system. Lowering rates widely doesn’t target aid to the borrowers who need it most. Over time, many professionals can afford to pay higher interest rates to the government that helped them get valuable educations. Carefully adjusting graduates’ monthly payments to their incomes would be a more progressive method.

In an executive order, Obama modestly expanded the pay-as-you-earn program, which caps monthly payments at 10 percent of a borrower’s income. The government forgives any remaining balance after 10 years for those in public service and after 20 years for everyone else.

Congress could do much more. Lawmakers should consolidate the many federal income-based repayment programs into one simple deal for all debtors. They need to reduce the incentive for graduate students to take out excessive loans. And they need to make sure that those who deserve and receive debt forgiveness aren’t taxed on the amount forgiven. Another good idea is bolstering the Pell Grant program to offer year-round grants, so that students can study over the summer, or expanding access to the Pell program to more people.

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