I have a high student loan debt at 8%. Part of it is unsubsidized.
I have heard talk of a new plan by the Obama administration to forgive student loan debt. How will this new plan be implemented? Who will be able to take advantage of it?
I am afraid that at this point it is still a whisper in the wind. I am not aware of any mass program that would forgive student loan debt. If there was such a program I would suggest it to everyone.
There are some programs to forgive student loan debt but they appear to be somewhat unrealistic. For example, you could work full-time for ten years in a disadvantaged part of the country and then ask for loan forgiveness. How many can do that? Or if you are a teacher, you might qualify for a teacher loan forgiveness program.
There are also some good opportunities out to consolidate government backed student loans at low rates or apply for a special Income Based Repayment (IBR) program. It won’t forgive your debt but it can lower your payments. You can use the IBR online calculator to see if you are eligible.
Monthly payments in the IBR program will be capped at 15 percent of monthly discretionary income. After 25 years of consistent payments, any remaining debt is forgiven. Hey, it’s only 25 years.
UPDATE: President Obama will propose a plan to cut the student loan payments of millions of Americans during his State of the Union address, the White House announced Monday. The president’s plan would cap payments on federal loans at 10% of a borrower’s income above a set minimum, defined as 150% of the poverty level for the borrower’s family, and allow loans to be forgiven after 20 years instead of 25.
The CFPB also released the Student Debt Repayment Assistant, an online tool that provides borrowers, many of whom may be struggling with repayment, with information on income-based repayment, deferments, alternative payment programs, and much more. The Student Debt Repayment Assistant is available online.
Provide a discount on consolidation loans. While all new federal student loans are now Direct Loans thanks to the historic reforms in the Health Care and Education Reconciliation Act, there are still $400 billion outstanding in old Federal Family Education Loans. These loans offer fewer repayment options and are unnecessarily expensive for taxpayers. In addition, about 6 million borrowers have at least one Direct Loan and at least one FFEL loan, which requires them to submit two separate monthly payments, a complexity that puts them at greater risk of default.
To ensure borrowers are not adversely impacted by this transition and to facilitate loan repayment while reducing taxpayer costs, the Department of Education is encouraging borrowers with split loans to consolidate their guaranteed FFEL loans into the Direct Loan program. Borrowers do not need to take any action at this time. Beginning in January 2012, the Department will reach out to qualified borrowers early next year to alert them of the opportunity.
This special consolidation initiative would keep the terms and conditions of the loans the same, and most importantly, beginning in January 2012, allow borrowers to make only one monthly payment, as opposed to two or more payments, greatly simplifying the repayment process. Borrowers who take advantage of this special, limited-time consolidation option would also receive up to a 0.5 percent reduction to their interest rate on some of their loans, which means lower monthly payments and saving hundreds in interest. Borrowers would receive a 0.25 percent interest rate reduction on their consolidated FFEL loans and an additional 0.25 percent interest rate reduction on the entire consolidated FFEL and DL balance.
President Obama has refocused attention again on student loan issues and the cost of education in his state of the union speech.
When kids do graduate, the most daunting challenge can be the cost of college. At a time when Americans owe more in tuition debt than credit card debt, this Congress needs to stop the interest rates on student loans from doubling in July. Extend the tuition tax credit we started that saves middle-class families thousands of dollars. And give more young people the chance to earn their way through college by doubling the number of work-study jobs in the next five years.
Of course, it’s not enough for us to increase student aid. We can’t just keep subsidizing skyrocketing tuition; we’ll run out of money. States also need to do their part, by making higher education a higher priority in their budgets. And colleges and universities have to do their part by working to keep costs down. Recently, I spoke with a group of college presidents who’ve done just that. Some schools re-design courses to help students finish more quickly. Some use better technology. The point is, it’s possible. So let me put colleges and universities on notice: If you can’t stop tuition from going up, the funding you get from taxpayers will go down. Higher education can’t be a luxury – it’s an economic imperative that every family in America should be able to afford. – Source
Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.