Senate panel OKs bill to rein in student-loan garnishment
A Senate committee advanced a bill to limit garnishment of wages for student loans. SB170 would cap garnishment at 15 percent of disposable earnings, equal to that allowed for federal student loans and below the general Utah garnishment limit of 25 percent of after-tax earnings.
Bill sponsor Sen. Peter Knudson, R-Brigham City, said private loans make up just 8 to 9 percent of total education loans and have a default rate in Utah of 2.88 percent.
"Student-loan debt can cause severe anxiety and serious problems to those individuals who have [it]," Knudson said. "It dampens their efforts to pursue careers ofttimes and discourages those that would like to start a business and it makes buying homes and cars even more difficult."
James Lear, who approached Knudson with the idea, said the legislation is primarily to provide relief for those who took out education loans during the subprime mortgage crisis between 2004 and 2009. He said the same things were happening with education loans as with home mortgages. He also said there was an increase in private-school debt, with schools more concerned with making a profit than ensuring that students graduated or found jobs.
"For many families it is almost like involuntary servitude because of the amount of debt they have unwittingly piled upon themselves thinking, 'I'm going to pursue the famous American Dream,' and for many it's turned into just a nightmare that has caused them grief that looks like there's no end in sight," Lear said.
George Sutton who serves as counsel for the Utah Bankers Association and the Association of Financial Services said the banks who give education loans have no objection to the garnishment cap being brought down to the federal level.
"They understand that people can get into a difficult situation and they don't see a big problem with bringing this in line," Sutton said.
Sen. Curt Bramble, R-Provo, said he voted to advance the bill, but has some concerns. He said indebted students knew what they were getting into and paying it back is an issue of honor and integrity.
Sen. Deidre Henderson, R-Spanish Fork, said the larger problem is there is considerable pressure for people to go to college and increasing tuition costs push them into taking out student loans. She said lowering the garnishment rate could create a loan bubble that will burst.
"We're trying to solve the problem by saying that if they can't repay, then the garnishments are going to be less. I think that creates a perverse disincentive for people to not be more prudent," Henderson said. "It's so easy to get student loans, it's so easy to get into this debt it concerns me."
Sen. John Valentine, R-Orem, said he voted in favor of the bill in order to continue discussion on the issue, but he may not support it on the Senate floor.