Why 400000 student loan borrowers are panicking
Throughout the previous year of the Obama administration, officials proposed revamping the student loan servicing system by creating a contract that would require servicers to work closely with borrowers at risk of default and send borrowers literature developed by the Consumer Financial Protection and Department of Education that informed borrowers of their rights, among other provisions. The Department of Education said that the tool will be available for borrowers to use for income-based repayment plans later this month.
A request for comment from the Education Department was not immediately returned.
A lot of people who went to grad school, or who are at least thinking about it, are going to be extremely unhappy if not outright panicked when the Trump administration releases its first detailed budget next week.
“A college education should be a path to prosperity not a path to indebtedness, but student loan debt is holding back an entire generation and creating a drag on economic growth for our country”, said Senator Baldwin.
CFPB has called for an overhaul of these programs to place greater emphasis on the long-term success of economically vulnerable student loan borrowers. Close to 80 percent of borrowers who rehabilitate their debt make the minimum $5 monthly payment, according to a 2015 estimate by the National Council of Higher Education Resources, a lobbying group that represents student debt collectors and servicers. And the definition of public service stretches much further than you might think.
The program could cost the government more than originally expected, according to the Government Accountability Office. The program is supposed to encourage borrowers to take lower paying jobs that benefit their communities, such as public defenders or teachers. If PSLF were eliminated, it’s unclear whether people who were already counting on the program would be affected. As it stands, the Education Department is locked in litigation with borrowers who claim the agency inexplicably changed the eligibility requirement for employment that counts as public service after approving the work. The option to enroll in different payment plans that may lower monthly payments is invaluable to borrowers who can’t afford standard repayment amounts. Trump’s budget would streamline those five plans into one and change the payment details.
As long you don’t qualify for some form of forgiveness, it’s better to pay off the federal PLUS loans first to save yourself from throwing more money at interest than at principal.
For example, if you charge $2,000 in expenses each month (and pay off your credit cards each month to avoid interest charges!) and your credit card awards you 1% of your charges ($20 per month), you’d get $240 per year back.
The bureau has called for loan servicers to make the transition from default to an income-based repayment plan easier for borrowers. “The federal government must do more to make sure students in OR and across the country have access to payment flexibility and debt relief, instead of creating more roadblocks to an affordable college education”. And don’t talk to me about budget savings when this same administration is now planning a historic tax cut for the rich. A billionaire president and billionaire education secretary, neither of whom spent a single day of their lives in public service before stumbling their way into positions of huge power, are targeting a program that’s basically meant to make life in underpaid government work a little more tenable. That would apply if the loans were taken out for an undergraduate degree.
“I am committed to helping students meet their repayment obligations and reaching their academic goals while also making government more effective and efficient”.