“Outstanding student-loan debt, right now the number has already surpassed credit-card debt and is expected to cross the $1-trillion mark for the first time this year” reported Mark Kantrowitz, the publisher of FinAid, in the Chronicle of Higher Education.
Solution
President Obama has proposed a student loan repayment plan that will decrease the interest rate on current direct and bank-based loans by half a percentage point. He is also allowing students to consolidate their direct and bank-based loans between January and June 2012. He also plans to accelerate a reduction in maximum percentage on income-based loans from the current standing at 15% to 10%. This was initially scheduled to take effect in 2014, however President Obama wishes it to begin in the 2012 fiscal year. (Field, 2011)
Another solution that is rather popular on the Chronicle opinion section by Kevin Carey is a repayment plan structured like the current income-contingent plan in Britain and Australia. According to Carey, in this system payments are automatically deducted from their income toward their loan payments. If someone makes more money, then more is taken out of their checks and their loan will be paid off quicker. If an individual falls below the poverty line all repayments will be suspended, and if they remain under the poverty line for over 20 years, then their loans will be forgiven (Carey, 2011). There is no defaulting because the government would get their money directly (Carey, 2011). This option is now possible because the government took over the loan system in 2010 from the private-sector (Field, 2011).
Some activists are calling for wholesale full student-loan forgiveness, however I do not see this happening anytime soon.
Resources
Carey, K. (2011, October 23). The U.S. should adopt income-based loans now [Web log post]. Retrieved from http://chronicle.com/article/The-US-Should-Adopt/129504/
Field, K. (2011). Obama’s student-loan plan scores political points but offers limited relief. The Chronicle of Higher Education. Retrieved from http://chronicle.com/article/Obama-Takes-Steps-to-Help/129533/
Selingo, J. (2011). How much student-loan debt is too much? The Chronicle of Higher Education. Retrieved from http://chronicle.com/blogs/next/2011/10/26/how-much-student-loan-debt-is-too-much/
Student loan debt can be stifling. I have a friend who went to Harvard Law School. When she graduated in 1998, she had a loan debt of $100,000 (which would be more if she graduated today). She was much more dedicated than me and she did not shop, go on vacation or eat out a lot and she paid off her $100,000 loan in five years! Working at a law firm she made a good salary and was eligible for bonuses for working extra hours. Every extra dollar she received she used to pay off that loan. I was proud of her for doing it but I know that most people cannot achieve this feat. Edwina T. Washington
ReplyDeleteWow- such an interesting statistic. One on hand, I am glad that we are financing more education than we are frivolous credit card purchases. However, the numbers are just astounding. Some career fields (like Law as Edwina mentioned) result in high-paying jobs. Others (like higher education) may have starting salaries of $30,000 per year or less, and when students leave college with large loan payments it can be difficult to make ends meet.
ReplyDelete-Destin Tucker
We knew that this would happen eventually--especially when it was decided that credit card companies coould no longer hangout in the Student Union picking-up unsuspecting freshmen.
ReplyDeleteInstead we moved the banks to the Financial Aid office to give loans to freshmen and their parents who are desperately wanting to enroll in school with no other student aid options.