Rubio looks to overhaul how student loans are repaid

TAMPA, Fla. (FOX 13) - Senator Marco Rubio knows first-hand there is a crisis when it comes to student loans in the United States.

"When I finished school, I had a little over $130,000, $140,000 in student loans,” Sen. Rubio said. “And it was really a burden for a long time."

This week, the Republican senator introduced The Leveraging Opportunities For Americans Now Act, or the LOAN Act. The bill would eliminate federal student loan interest and replace it with a flat one-time fee paid out over the repayment terms. He laid out an example.

"If you take out a $10,000 loan, rather than charging interest that grows over time, there would be a flat fee of about 25% of the size of the loan, so you'd owe $12,500,” Rubio explained. “But that fee doesn't grow. That's what you owe. A $10,000 loan costs $12,500, and that's what it's going to cost the whole time. You don't have to worry about if it takes you 20 years, that could grow to $25,000, you know? It could double!"

Borrowers will automatically go into an income-based repayment plan where they pay 10% of their earnings in excess of $10,000.

It's likely something already on the minds of this spring's graduates. The Federal Reserve estimates Americans owe $1.5 trillion in student debt. On average, the typical borrower owes between $20,000 and $25,000. 

And sometimes, the interest rates aren’t fixed, and you can owe twice as much as you borrowed. Rubio’s hope is to change that.

"We want to make sure we can provide these loans, provide them and pay for the cost of servicing the loans, but at the same time, not try to compound the interest rate that hurts the borrowers," he said.