WASHINGTON (KFDX/KJTL) — Kentucky Republican Senator Rand Paul said too many Americans are struggling to pay down college debt, which is why he’s introduced the HELPER Act.
The HELPER Act is a bill to let people withdraw up to $5,250 annually from their retirement accounts, tax, and penalty-free, to reduce college loans.
Sen. Paul said, “we think it would dramatically transform the way college is paid for in our country.”
Paul said with more companies matching 401k contributions, even Americans on smaller incomes are saving money.
He says letting people reduce debt now creates opportunities to save more in the future.
Sen. Paul said, “this still encourages savings, so it doesn’t work unless you will put aside savings,”
Critics say the idea only helps a certain class.
Wesley Whistle, New America Senior Advisor for Policy and Strategy Higher Education said, “it would be a win for people who have a lot of money and can take an extra tax break by investing in their 401k first and then taking it out tax-free, but those are the people who don’t actually struggle with student debt.”
Financial experts warn retirement account withdrawals do come with long term costs.
Roger Young, T. Rowe Price Financial Planner said, “we continue to send the message that it’s best if you can leave that money untapped and invested it and let it hopefully benefit for some growth.”
The senator is also proposing to let parents withdraw retirement money tax-free, meaning a student with two parents support, could pay off up to $15,750 worth of loans, tax-free, a year.
Senator Paul tells FOX News that he has reached out to some senate Democrats to build support for the bill.
Sen. Paul said, “I think there’s a big audience for this,” and he hopes more students will speak up to pressure lawmakers to create more ways to reduce the burden of college debt.
Senator Paul said he’s considering expanding his proposal to offer tax-free benefits to grandparents of borrowers as well.