Obama’s Loan Forgiveness
by Daniel Luzer
Reduce student loan payments! Oh the lure of advertising. An article by Charles Dervarics in Diverse Issues in Higher Education touts income-based repayment of student loans as one of President Obama’s signature new initiatives. According to the article:
While complex in execution, the idea has a simple premise: Students repay their loans based only on how much they earn. Since payments are pegged to income, borrowers would have the flexibility to take lower-paying public service jobs without excessive debt burden.
Basically, students could cap their monthly loan payments to ten percent of their income. This is an interesting idea but Obama isn’t exactly getting all Robert Applebaum with student debt just yet.
In fact, the Obama loan forgiveness program basically already exists, though it doesn’t actually help much. There’s the Income-Based Repayment program, which prevents students from being forced to make payments in excess of 15 percent of income. There’s also the Income Contingent Repayment program, available to students who only to borrowed money through the government-funded Direct Loan program. Only about three percent of students now take advantage of that program.
The Obama plan, which would extend some form of loan forgiveness to 25 percent of students with education debt, needs congressional approval. According to the Dervarics article, “one prominent leader already has endorsed the change. The change will ‘make repaying student loans more affordable,’ said Rep. George Miller, D-Calif., chairman of the House Education and Labor Committee.” Getting the support of George Miller, a member of the Congressional Progressive Caucus, for a proposal like this is not terribly difficult.
Considering the effort the student loan industry has expended to opposing direct lending, it seems unlikely loan forgiveness (which some have characterized as “welfare”) is going to go far.
Comments
Post a commentC. Cryn Johannsen on Wed 3 Mar 2010 11:36 AM
I am an advocate for the indentured educated class, and hope that you join my support group. We are starting a grassroots movement that is entirely democratic - get involved! I've been in touch with the White House and Senators' offices about the student lending crisis, and want more people to take a leading role in solving this problem. If you want to be State Support Leader, please get in touch with me.
-Cryn Johannsen, Creator of Education Matters/Student Loan Debto Advocated http://alleducationmatters.blogspot.com/
C. Cryn Johannsen on Wed 3 Mar 2010 11:38 AM
Sorry for the typos. I am a teacher in Korea and have had a long, long day.
-Cryn Johannsen, Founder of Education Matters/Student Loan Debt Advocate
CHECK OUT THIS SHORT CLIP ABOUT THE STUDENT LENDING CRISIS AND WHAT YOU CAN DO - http://www.youtube.com/watch?v=ArC6UHatvzY&feature=player_embedded#
Aimee Powell on Wed 3 Mar 2010 11:48 AM
Industry opposition shouldn't be allowed by any of us to be a barrier to fairness for student borrowers. According to a recent figure supplied by Equifax, there are now 69 million borrowers holding student loan accounts in this country. This issue affects a substantial segment of the population. As a nation, we simply can't afford to continue to allow this industry to dictate policy while we sit idly by, nor can we allow efforts to aid those in distress to be called "welfare" by an industry that was more than happy to take almost $1 billion in "aid" from taxpayers this year.
It's also important to note that many borrowers who could benefit from the IBR and ICR programs are prevented from participation because of how the programs are structured. Both programs take joint income into account, but do not currently consider joint indebtedness. (This will change under IBR in the summer of 2010.) In addition, ICR repayment amounts can be higher, in some cases, than the borrower's payments might be under a standard ten-year repayment plan. Finally. IBR doesn't help those holding PLUS loan debt, and neither aids the growing number of borrowers struggling under the shameful terms of their private student loans.
Dawn on Wed 3 Mar 2010 12:24 PM
It's not government loans that need the help, it's those of us that are so weighted down with PRIVATE loans that need debt forgiveness and caps on interest, etc. Five years after taking out a 30K loan, my loan is 75K. And they want to stretch this out to 30 years?? I'll be they do! Stop this oppression of our educated poor! Forgive student loan debt and stimulate the economy in the process!
Abby on Wed 3 Mar 2010 12:37 PM
I agree! Its private loans that are killing every one! My original loan amount at Sallie Mae is 56,000 and by the time its paid it will be over 150,000 thats not including the rest of my loans! My federal ones arent the problem! I hope they help us or "forgive" us for getting an education! I work in a state funded clinic and cant get help?!!! SO I hope something changes!
Nick on Wed 3 Mar 2010 12:45 PM
This is typical. The Private Student Loans are the ones that need a complete overhaul. If the lobbying in Washington cotinues nothing will change. Sallie Mae owns a lot of us. Nothing will change. Our numbers are still low and the rich get richer and the poor get poorer. We will continue to to be slaves to our debt. Our president and congressmen don't care. They have their own agenda. I hate Sallie Mae!
k on Wed 3 Mar 2010 12:49 PM
I disagree! It is not only private loans that are killing everyone! I think its unfair for people with private loans to say they are the only ones that need help. I have a federal loan and it is just as bad. There are no consumer protections. The interest rate was locked in at a very high %. Now they will not allow me to consolidate a 2nd time to get a lower interest rate. I have been on forbearance and deferment and most of the amount i owe is not the principal balance but the capitalized interest.
willow26 on Wed 3 Mar 2010 07:39 PM
well k I think it's all relative. I know I can never pay my federal/private combo of $124,000 in student loans. I am just wishing for an affordable payment and way to avoid default. I can't consolidate my private loans at any interest rate. Separate payments, separate on my credit report. If your goal is to actually get it paid off before you die I can see how you might have a complaint about federal loans. My federal loans are soooo easy. Defer, defer, defer, and then I always have ICR as an option if not. I know I can never pay it off, I have accepted that, so it doesn't matter what the interest rate is as long as the payment is limited to a certain percentage of my disposable income. THAT would be nice.
k on Thu 4 Mar 2010 12:01 AM
To Willow26 This is a post from Ed McKinley who posted this on Inside Higher Ed. I hope Ed doesn't mind that I am posting it here. i think he makes a very good point and explains it better than I did
Just A Little Bit Pregnant
Posted by Ed McKinley on September 24, 2009 at 9:45am EDT
While I applaud the efforts to recognize the predatory nature of private student loans, I resent the implication that federally guarenteed loans, that are subject to the same lack of any consumer protection, are some sort of panacea of fairness.
Just ask any of the tens of thousands ( if not hundreds of thousands) of borrowers who are currently living under a cloud of financial ruin. Oh, but I get it. Sure federally guarenteed loans are predatory too, but they are "less" predatory, so that makes it 'OK."
All of these loans are a do or die trying gamble. If federally guaranteed loans are so "default proof," then please explain the vast numbers of borrowers that have been forced into default.
What is far more devastating is that once in default their are absolutely no incentives whatsoever for servicers or guarantors to work with borrowers in any reasonable way to put these loans back into good standing. Yes even federally guarenteed loans are subjected to unbelievable penalties and interest that cause the balances to quickly explode to 2,3 even 4 or more times their original value.
Loan "rehabilitation" programs are a joke as they simply roll all that into a lifetime debt comittment that cripples most borrowers.
You can't be just a little bit pregnant. Either you are or you are not. But, what the heck. My loans were not quite as predatory as those suffering the consequences of private loans so I guess I can just suck it up and take one for the team.
I defaulted because early on because I was unable to pay. But when I became able to pay I found that wasn't good enough. If I could,t pay on a $38,000 loan after graduation what in God's name makes anyone think I can begin to resolve a $110,000 debt now. I've never asked for bankruptcy protection, simply the means to reach an agreement that might make it possible for me to some day repay the money I borrowed. Does anyone else see something wrong with this picture ? Retoring ALL consumer protections to ALL forms of student loan debt is the only realistic and fair way to begin to resolve long standing delinquent student loan debts and begin to bring soaring costs of college tuition and fees back under control. The ball is starting to roll, let's get it right this time.
J. Densmore on Fri 5 Mar 2010 07:25 PM
Student loans are student loans people. Whether federal or private everyone is in the same boat. We were all overcharged for degrees, sold the snake oil that promised the promised land, and burdened with massive debts we can't repay in our lifetimes or discharge in bankruptcy.
Don't drink the cool aid that says there are different student loans and student loan borrowers. All student loan borrowers must work together to get the job done - any change to the system will benefit us all.
Warmest Regards,
J. Densmore
Education, Student Loans and (F)utility
http://misplacededucation.blogspot.com/
Penut on Thu 18 Mar 2010 03:25 AM
I know 'We The People of The United States' need Obama to follow through with the student loan debt forgiveness.
Beverly Stout on Mon 22 Mar 2010 02:46 PM
"We The People of The United States". When I hear this I think every single person in the USA. Every person in the USA that has a student loan, whether it is Federal or a private institution student loan, they all need some help. Forgiveness can be a portion, even a 40% amount of forgiveness would be such a help to our fellow man or woman. Please help our citizens, and give them some hope of getting out of debt.
Paul on Thu 25 Mar 2010 12:55 AM
Many "private loans" (i.e. Sallie Mae) can be re-consolidated into a Federal Direct Loan and then you can qualify for the Income-Based Repayment plan.
Studebt on Thu 13 May 2010 06:28 PM
Forgive every student loan in which the graduate achieved a 3.5 or higher GPA. Is our country going to arrest 70 million college grads.? Everything in our nation and its leaders, declare-Education,Education!!!!
Now we have it; with nowhere to earn.