By this point, it’s been established that student loan debt is through the roof, that college is the next “bubble” and that the class of 2014 is the most indebted ever.
Student loan debt now surpasses credit card debt, according to the Federal Reserve Bank of New York’s February report, and it’s second only to mortgage debt.
“The problem is that students are borrowing too much money, and the federal government is not doing enough to provide need-based funding,” Richard Wilder, University of Florida’s director of student financial affairs, said.
The 2012-2013 UF student financial affairs fact book shows that UF undergrads walk away from graduation with an average of $20,708 in debt. That’s well below the national average — $29,400 — but it’s nonetheless a sizable chunk of money.
So there clearly is a problem. But where are the solutions?
That is where new, lenient federal student loan rules come in.
Via: bangordailynews.com
According to the Huffington Post, the Obama Administration’s budget for 2015 proposes a broadening of student loan debt forgiveness programs.
The proposed expansions will increase flexibility of payment by bolstering the Pay As You Earn plan, which was established in 2012. The number of students taking advantage of these lenient payment terms and debt forgiveness programs has increased by about 40 percent in the past six months, according to George Leef’s Forbes.com op-ed.
Under PAYE, students don’t make set monthly payments. Instead, they make payments proportional to 10 percent of their discretionary income each month.
PAYE also has two distinct debt-forgiveness features. Any balance remaining after 20 years is forgiven if the borrower works in the private sector. For borrowers employed in the public sector, debt is forgiven after 10 years.
So payment terms that are flexible and easy are good, but let’s not forget that when something seems too good to be true, it often is. In fact, it’s pretty obvious that there’s a catch to all this generosity.
The forgiveness features of PAYE encourage students to work in the public sector, which pays less than the private sector and does relatively less to stimulate and expand the national economy.
Adding insult to injury, the burden of student loan debt will also be transferred to taxpayers. PAYE’s forgiveness features essentially encourage college students to take on large amounts of debt because the limited window of accountability lets them off the hook after 10 or 20 years. Eventually, taxpayers will be handed some of the responsibility of paying for somebody’s (or, rather, lots of somebodies) overpriced college education.
You might be thinking “Better them than me, right?” If that thought did indeed cross your mind, slow your roll. You’re obviously forgetting that you will soon be a taxpayer yourself, if you aren’t one already, meaning you’ll eventually pick up the tab not only for your own unaffordable college degree but a million other people’s, too. Isn’t higher education great?
The federal government’s “generosity” apparently does more harm than good, so you gotta help yourself — how, you ask?
Via: frumforum.com
“Learn to budget, and know what your need expenses are,” Wilder said. “Only borrow what you absolutely have to have to pay for your education.”
And that’s all, folks. Good luck and godspeed.
Feature photo courtesy of: Carbonated TV
