Congress Offers Relief to Student Debtors
Mon 06 Jul 2009 – 20.10
If you’re like me, and the millions of others who are burdened with many thousands of dollars of student debt, then here is a bit of good news: the US government will take action to make loan repayments proportional to earned income, and will forgive loans after 25 years of faithful repayments.
The terms are highlighted in an article from The New York Times dated last week.
… the interest rate on new federal Stafford loans, the most widely used federally guaranteed student loan, will drop to 5.6 percent, from 6 percent. By 2012, the rate will fall to 3.4 percent, under a schedule mandated by Congress.
… The extended payment program, called “income-based repayment,” limits what borrowers have to pay to 15 percent of the difference between their gross income and 150 percent of federal poverty guidelines. After borrowers make payments on loans for 25 years, the balance is forgiven. (The Education Department already offered an “income-contingent” repayment plan, which was similar, but less generous.)
There’s a ton of charts and numbers to comb through, so if you’re interested, definitely check out the Times article, and poke around the links.
This scheme appears to be similar to one that is offered in Britain, where students aren’t obliged to repay loans until they are earning at least £10,000 per year. That isn’t a great sum, about $18,000, but it implies that if you’re properly unemployed, or only working part-time at the local pub, you aren’t going to be burdened with a monthly payment for that expensive education you’re not “using.” Then again, in Britain tuition fees top out around £2500 per year for UK students, so I don’t feel too sorry for them.
Is this finally a chink in the armour of the American college capitalist system? Is the government inching slowly toward the European-style socialism that our population so desperately craves (whether we know it or not)? Will this new plan help prevent education from being the next bubble to burst?
Your thoughts:
posted by Scott in education,personal finance.
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