Petri Introduces ExCEL Act for Automatic Student Loan Withholding

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December 18, 2012 · by mlivolsi · Spark Notes

Prepared by: Wes Huffman (

Representative Tom Petri (R-WI) introduced his bill for automatic withholding of student loan payments, H.R. 6674, the Earnings Contingent Education Loan (ExCEL) Act. The bill would limit payments to 15 percent of income, place caps on the overall cost of federal student loan interest and fees at 150% of principal, and replace the Stafford Loan program with Income Dependent Education Assistance Loans (IDEA).

All IDEA loans would be unsubsidized, except to those serving in the military. The interest rates would vary, fixed at the time of origination at a spread of either 3.0 or 4.1 percent above the 10-year Treasury note. According to Petri’s office, this combination “saves money” and they are hopeful the Congress will consider this legislation next year.

In terms of budget scoring, the elimination of the in-school interest subsidy for Stafford Loans and dropping loan forgiveness after 20 or 25 years of income-based repayment would generate a great deal of savings for the government, but the limitation of interest is a bit of a wild card in terms of whether or not it would cost or save the government money. For instance, officials in the UK, the repayment scheme most-often cited by Petri and others, have indicated that more than half of borrowers there ultimately have part of their balance written-off.

The legislation is quite complex, involving another major reworking of the federal student loan programs. (Parent PLUS loans would apparently not be directly affected.) For that reason alone, it is unlikely to be passed anytime soon, since the Department of Education is still wrestling with implementation of the 2010 loan program restructuring. Before the legislation was introduced, an article from Bloomberg suggested the plan was a new idea although it is really a variation of something Petri has proposed for 20 years.

Some outlets picked up on the story and presented Petri’s proposal to students. It was widely panned. “I think that's a terrible idea,” Cara Lewis, a sophomore at Virginia Commonwealth University, told WWBT-12 of Richmond, VA.

Additional information, including legislative text and a fact sheet prepared by Rep. Petri’s office, is available online: