The United States is facing a student loan debt crisis. Student debt loans in the country are over $1.48 trillion owed by 44 million borrowers, and the default rate is 11.2 percent. It is the second largest source of household debt after housing.
There are many reasons for the rising rate in loan delinquency. Foremost being, the economy has not met the expectations of the job market in recent years. The unemployment rate for college graduates stands at around 4.5 percent. Further, the degree you attain and from what college, whether it is from a prestigious non-profit institute or public college, also affects a student’s earning prowess and prospects. Most entry level jobs do not pay enough to enable students to repay debts.
Dropouts form a disproportionately large number on the defaulters’ list. “We don’t have a student-loan problem so much as a we have a graduation problem. And if current trends continue, we may be in a crisis point in two decades from now,” says higher-education expert Mark Kantrowitz
There have been numerous attempts by the government to ease the burden on the students with various student loan forgiveness programs. People working in public service, education, military and other areas can claim concessions. One is required to pay a certain amount adjusted to the earnings and the rest is forgiven. But there are many rules for such programs. A thorough check of the requirements is recommended.
In 2014, a student loan forgiveness program was started by Obama, also known as the Pay As You Earn or PAYE loan repayment plan. The program expands the eligibility to loans granted before 2007. It is an income driven repayment program that limits the monthly payment at 10 percent of the borrower’s income and one can pay up to 20 years, after which the loan is forgiven.
Recently, President Trump proposed some changes to the Public Service Loan Forgiveness program. The plan is to merge the income-driven federal repayment schemes into a single student loan repayment plan. The proposal differs for undergraduate and graduate borrowers.
The monthly repayment plan for undergraduates will be capped at 12.5 percent of the income for 15 years, which will be forgiven after that. But graduates will have to pay for 30 years at 12.5 percent, after which the remaining loan will be forgiven,
Subsidized student loans will be discontinued under this program.
Some additional changes are being proposed by Education Secretary Betsy DeVos to the servicing of student debts. The department has issued a”notice of interpretation”, stating that private companies collecting federal student loans will come under only Federal government purview and state governments will no longer be able to exert any control over their workings. But some state attorney generals have issued a joint letter condemning the move, which would effectively block any investigations into fraudulent practices of independent student loan servicing companies. The education department is also tightening rules for students seeking debt forgiveness based on fraudulent practices of the universities.
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