We have probably all heard about the $10,000 ($20,000 if the borrow qualified for Pell grants) student loan debt cancellation and I'm sure we all have our opinions on that, but I would like to point out aspects of the program that the media seems to be largely ignoring or glossing over that will have a much more significant impact on borrowers in the long run.
The program is three parts: extension of the pandemic forbearance period on student loans held by the Department of Education through the end of the year, the loan debt cancellation I already mentioned, and the overhaul of the income-based repayment (IBR) system.
Of note here is that the second part of the plan includes the temporary PSLF changes that were initiated earlier this summer that allows qualified borrowers to include loans that previously did not qualify for PSLF under the PSLF program. If you are a non-profit or civil servant employee, look into that before that portion of the program ends in October.
That third part is what the media should be talking about and here is what the overhaul of the IBR system means for borrowers:
1. The percentage of the payment under IBR will be 5% of discretionary income as opposed to the current 10% (if you are on an IBR program, your payments should become about half of what they are now).
2. The threshold for what is considered non-discretionary income will be raised so that those making minimum wage will qualify for a zero payment at that income level. This means that a zero payment will count towards their 10 - 20 years of payments towards forgiveness, good news for students who can't find solid high-paying work in their field straight out of college but are working towards a better income.
3. For loan balances of $12,000 and below, the payment term for full forgiveness will be 10 years rather than 20 on loans that do not qualify for PSLF (PSLF qualifying loans is already 10 years).
4. This is the big one, imo. Loan balance will no longer continue to grow so long as the borrower is making the agreed payments under the program (this includes a zero payment for low-income borrowers).
That last one is major because student loan interest compounding in forbearance and in IBR repayment makes student loans predatory and the primary reason borrowers find repayment out of reach even once their income reaches a level that could reasonably repay the original loan. This will permit borrowers to actually repay their loans.
The one-time limited debt cancellation is insignificant compared to this change and, honestly, they could have made only this change and I would have been thrilled and happy to continue paying my student loans (at this point in my life, $10,000 won't even cover the entirety of predatory interest I have accrued since the 1990s, but that's behind us now and I'll be happy to pay a loan that doesn't continue to grow at a preposterous pace despite making all payments).
https://studentaid.gov/debt-relief-announcement/
The whole thing does nothing for students whose debts were sold off to private companies by the DoE, and who typically have some of the highest interest rates.
My wife is one such student who still owes more than $40k on her student loans, and who has been faithfully making payments for over 20 years.
Quote from: Anianna on August 24, 2022, 09:28:22 PMaspects of the program that the media seems to be largely ignoring or glossing over that will have a much more significant impact on borrowers in the long run.
(https://tse4.mm.bing.net/th/id/OIP.C1mGg-eU2yyyknNamFQwBQHaEj?pid=ImgDet&rs=1)
For some strange reason, it doesn't surprise me to see that a prepper forum would be more likely to consider the long-term effects of things more than the general population, both good and bad.
Incidentally, and entirely unrelated, watch tuition prices rise.
I will not dive into this due to politics.
I will however note that the cost of this program change both short and long term add to the US debt which means every US taxpayer funds this debt increase.
Despite assurances to the contrary by self serving PTB interests; this will further fuel inflation. The CBO has released the data on their estimate but the absolutely silly claims that this will have no fiscal impact are not credible.
The question should be how much not if it adds to inflation.
That caveat noted, if you individually can benefit from this change you should take advantage of the program to reduce your debt.
Quote from: Raptor on August 25, 2022, 12:39:01 PMI will not dive into this due to politics.
After helping my wife pay off her Pell Grant when we were newly married, then me paying into the GI Bill but leaving most of money unused (and not refundable), staying away from this one too.
Quote from: NT2C on August 24, 2022, 09:54:55 PMThe whole thing does nothing for students whose debts were sold off to private companies by the DoE, and who typically have some of the highest interest rates.
My wife is one such student who still owes more than $40k on her student loans, and who has been faithfully making payments for over 20 years.
Some plans that were sold off now qualify under PSLF, which your wife should qualify for. She would have to file the paperwork for PSLF specifically for those loans before October 30, 2022 to get them moved back. It is not automatic even if she is already signed up for PSLF on the loans that had already qualified.
Some loans will continue to not qualify, though. My husband and I were (I feel) tricked into a spousal consolidation loan before they were outright banned. We can't separate them and the lenders are very predatory with them doing things like trying to double bill us and, while it does qualify for IBR, it doesn't qualify for a lot of other features such as the current pandemic forbearance or PSLF even though our individual parts would if they were separate and it very likely will not qualify for the cancellation. I hope it qualifies for the new IBR plan so it can stop growing and maybe we can actually get it paid down.
The plan doesn't fix everything, for sure, and a lot of it is problematic, but I am excited to see that it offers a means to eliminate the predatory interest compounding that has plagued the system since its inception.
Quote from: Raptor on August 25, 2022, 12:39:01 PMI will not dive into this due to politics.
I will however note that the cost of this program change both short and long term add to the US debt which means every US taxpayer funds this debt increase.
Despite assurances to the contrary by self serving PTB interests; this will further fuel inflation. The CBO has released the data on their estimate but the absolutely silly claims that this will have no fiscal impact are not credible.
The question should be how much not if it adds to inflation.
That caveat noted, if you individually can benefit from this change you should take advantage of the program to reduce your debt.
I do wish they had stuck just to eliminating the predatory portions of the system, devising preemptive measures against shady lenders taking advantage of the system, and nipping excessive tuition hikes in the bud, but it's a big midterm election year and the population tends to forget little things like that, so here we are and that's as political as I get here.