Income based repayment plans for student loans would help improve cashflows in student loan securitizations, industry sources say.

Rep. Tom Petri, R-Wis., on Monday, introduced legislation that would require employers to withhold payments from wages in the same way they do taxes. Under the plan, former students would repay their loans at rates determined by their income in any given year.  If the borrower has a prosperous year, he or she would repay the loan more quickly.  If the borrower makes very little, the repayment would automatically be stretched out -- with protections against negative amortization. Payments would be capped at 15 %of borrowers’ income after basic living expenses.

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