Obama's Student Loan Relief Plan: How Helpful Would it Be?
President Obama outlined a intend to speed up help for millions of Americans struggling with the get of higher education. Gwen Ifill discusses the ...
Federal Parent Loan Forgiveness And Repayment Assistance–Options That May Help ...
Parents who take sway of federal loans to help with college tuition costs are in a position where they have not only repayment help options available on these college loans but there are potential opportunities for forgiveness as well, but depending on the setting, a parent may not be allowed to take advantage of all opportunities that could make their loan in a more affordable or offer forgiveness. Yet, parent loans, like the PLUS loan do offering assistance plans if a parent is having trouble repaying their own as deferment, forbearance, and even lower payment opportunities on parent college loans can be made within reach in some cases, but this is where parents must look at their particular situation as to whether they qualify.
In cases where parents may have multiple loans, one of the options that has been hardened in the past has usually surrounded consolidation as parent loans that are consolidated may be more affordable in terms of the monthly payment that parent receives, as interest rates that may be elbow on a parent loan could be around 7.9%, which is a fixed rate, but of course if multiple loans are in place some parents have found that consolidating to one interest classification may be helpful despite the fact that a higher principle amount will have to be paid.
Yet, parents may also be in a stand to take advantage of the cancellation of their loans if they qualify for the public service loan forgiveness program, as this project allows borrowers of federal student loans to have their remaining balance discharged after making 120 payments, or barely paying in a timely manner for 10 years. Obviously, we have seen a exceptional deal of news as of late surrounding student loans, which are hoped to be altered in a way that will appropriate students to get more affordable rates and even be able to have their loans forgiven after 20 years in repayment, when this ten year forgiveness alternative is not available, but parent loans may still be in the category where these traditional assistance options will be needed.
Since each place will differ, parents are often urged to contact their federal loan lender/servicer to get more low-down on a specific situation, as different types of loans may have different assistance opportunities sincere to the borrowers, but in many cases parents who are struggling to repay their federal student loan do need to recognize that opportunities are typically available in terms of more affordable payments, consolidation options, and even these forgiveness plans, if a steep amount of debt is in place. Parents, like student borrowers, are not guaranteed to be able to modulate for forgiveness plans or certain types of opportunities, but when circumstances are in place that prevent a parent from paying the overall amount that is due on their loans on a monthly basis, many have found that these forgiveness or payment reduction plans can be helpful when it comes to avoiding missing payments.
Again though, some qualifications do have to be met my parents but the nullification of these loans or the simple consolidation options and payment reduction plans that many parents ask for do oftentimes come as one aspect of these loans, in the area of repayment assistance needs, so borrowers of parent loans who are struggling financially and may requirement help are often urged to look at these opportunities quickly so that they can avoid financial setbacks that may avoid them from honoring this debt in an affordable way.
parent plus student loan forgiveness - Bookshelf
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296 pages |
Building Wealth and Eliminating Debt The loan repayment begins nine months after the student leaves the middle school. yy Federal Parent Plus-These loans are made by the parents and require the ... |
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288 pages |
How to Wipe Out Your Student Loans and Be Debt Free Fast, Everything You Need to Know Explained Simply purchasing unencumbered Stafford and PLUS loans originated between 10/1/03 and ... repayment on the Parent PLUS loan until six months after the student leaves ... |
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562 pages |
Student loan law, collections, intercepts, deferments, discharges, repayment plans, and trade school abuses For parent PLUS loan borrowers, the lender must attend to arrange for information about how the parent may defer payment on the loan while the student on whose behalf the ... |
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The new payment option is intended to provide relief for those who earn modest salaries and struggle under the weight of student loans for years on end. By stretching repayment over a longer period, monthly payments are kept at a reasonable portion of income, though most people would not see any savings on the total cost of the loan. In some cases, accruing interest could push the cost of the loan higher. And since loans are likely to be paid off within 25 years, the loan forgiveness aspect of the program won't apply to most people. To save on interest costs, those who could afford to would be better served paying off loans faster, said Mark Kantrowitz, publisher of If a salary jump eventually disqualifies a borrower for the capped monthly payments, they would still be responsible for the cost of the loan and the interest that accrued up to that point. Monthly payments still couldn't exceed what they would be under a standard 10-year repayment plan. Of course, borrowers could opt to pay off debts faster if they chose.
The Need for Simplification of the Public Service Loan Forgiveness Program
After spending a good part of yesterday afternoon figuring out the ins and outs of the Income-Based Repayment program and the Public Service Loan Forgiveness Program, I got to thinking that there must be a simpler way.
Today, I will tackle the Public Service Loan Forgiveness Program. I had this thought of simplification in mind as I read this article from the New America Foundation "Fixes Needed for Federal Program Promoting Public Service. " The article focuses its attention on the fact that students would not know if the public service jobs they have will qualify them to have their loans forgiven until the end of the 10 year period:
Annual certification of borrower-employees : "The commenters recommended that the Department create an on-line, password-protected system through which qualifying employers could annually certify the employment of borrower-employees, or otherwise provide a reliable system for borrowers to document, confirm, and track job eligibility." Employer pre-certification : "...establish a program of employer pre-certification under which the Department would maintain an ongoing list of certified eligible employers for borrower reference." SLA note : With this pre-certification, companies can feel comfortable that they can advertise this as a benefit to prospective employees. This would be tremendous exposure for the program and and help to increase awareness of it. Put the loan forgiveness terms in the DL MPN : "Many commenters urged the Department to incorporate the public service loan forgiveness program as a term and condition in the Department’s Direct Loan master promissory note (MPN)." Department's response to comments about the MPN : "However, the MPN will continue to state, as it currently does, that the terms and conditions of the loans are subject to the HEA as it is amended in accordance with the effective date of those amendments. Although there is no history in the program of Congress eliminating or reducing a borrower benefit, the Department does not believe that a reference to the public service loan forgiveness program in the MPN would provide the borrower with a contractual right to the benefit should Congress take action to eliminate that benefit from the HEA as of a particular effective date." For a cautionary tale about the tenuous nature of some loan forgiveness programs, click here . I would argue in this environment, it would behoove regulators to provide greater protections and assurances to borrowers above and beyond "...no history in the program of Congress eliminating or reducing a borrower benefit."As for the Department's solution to these suggestions (hint: when in doubt, suggest a form):
Answer: When it has this many strings attached that only a very few will benefit from it. If you review all that is required to earn this loan forgiveness, one would certainly get the impression that the focus is on minimizing cost rather than providing an incentive for students to choose public service.
So, what exactly does an aspiring public servant need to do to earn this "benefit":
Not be in default on their loan Must have a Direct Loan If FFEL borrower, you can consolidate into a Direct Consolidation Loan Work full-time at public service organization (or Peace Corps or Americorps) Service does NOT need to be continuous over a 10 year period Public service organization is broadly defined to include any public employer (federal, state, local, tribal), any tax-exempt 501(c)(3) non-profit and includes public K-12, hospitals and universities Make 120 qualifying and on-time payments (within 15 days of the due date) Note that these payments do NOT need to be consecutively on-time as my earlier post had indicated Set up on income-based repayment planAnd once you have done all of that...then you get to apply for forgiveness...and find out if your 10 years of labor for the public good will lead to absolution (I mean loan forgiveness). If the intent of the forgiveness program is to minimize the cost to the federal government and to impact as few borrowers as possible, this design is a winner.
If they really want to create a program with impact, two suggestions would help:
Provide a directory of companies that are eligible employers for this program. As stated earlier, this would have the added benefit of having thousands of employers advertising the program thereby increasing awareness and participation levels. As for the "complexity of this task", setting up this list upfront saves time on the back-end that the Department will be spending verifying employer eligibility. Establish a vesting schedule so that the loan forgiveness occurs gradually over time rather than just after 10 years.There is a better way...How about introducing the concept of a vesting schedule (sorry my compensation background is showing through)? It might look something like this:
Updated (7/5/2009) : Thanks to Laura Asher at TICAS for clarifying that the public service loan forgiveness program does NOT require 120 consecutively on-time payments nor does it require 10 years of uninterrupted service at a public service company. I think she summarized the program succintly by noting "You have to make the right kind of payment, on the right kind of loan, while in the right kind of job 120 timesHaving wrestled with the task of explaining the Public Service Loan Forgiveness Program to graduating medical students this past spring, I think you have hit on the major flaws in the program and made some interesting suggestions to fix them. It is my understanding the program was designed by lawyers for law school graduates interested in public interest law. It does not seem a good fit for any other group of borrowers. In fact, I think you are correct when you suggest this program is just lip service by politicians to the concept of public service. They certainly played it for more than it is worth. That is a sad statement.