Here are the best articles from around the web this week talking about student loans…
For the week ending Friday April 19, 2014
Student Loan News:
1. Student Loan Repayment Plans Could Cost Borrowers More:
Income-driven repayment provides a reprieve for struggling borrowers trying to pay back their student loan debt. But some policy experts say the federal program offering such plans is not as effective as it could be, and can actually end up costing student borrowers more in the long run.
Under the Income-Based Repayment plan, monthly payments for those who enroll are capped at 15 percent of their incomes and after 25 years, any remaining debt is forgiven. And under the “Pay As You Earn” option, monthly payments are as low as 10 percent of a borrower's disposable income and debts are forgiven after 20 years. Because such plans are fairly underutilized, there's been a push to make income-based repayment the default option for all borrowers or at least to open up the plans to everyone, as President Barack Obama proposed in his 2015 budget. Find more info: http://www.usnews.com/news/articles/2014/04/14/student-loan-repayment-plans-could-actually-cost-borrowers-more-money
2. Sallie Mae Cheated Soldiers On Federal Student Loans, Government Investigators Find:
Federal investigators have uncovered evidence that Sallie Mae cheated active-duty soldiers on federal student loans, according to people familiar with the matter.
The findings, if eventually made public as part of a lawsuit or settlement agreement, may threaten Sallie Mae's lucrative contract with the U.S. Department of Education to collect payments on federal student loans. The department's contract requires loan servicers comply with all federal laws when handling federal student loans.
The allegation also may further embarrass the Education Department, already under fire for lax oversight of student loan companies that are paid by taxpayers, yet are alleged to have repeatedly violated federal rules. The department told Sallie Mae in October that it planned to renew its contract to service federal student loans. Main website: http://www.huffingtonpost.com/2014/04/16/sallie-mae-servicemembers_n_5162736.html
3. Student loan-debt solutions needed:
As student-loan debt tops $1 trillion nationally, state lawmakers are recommending ways to ease the burden on Massachusetts college students.
About 66 percent of Massachusetts students take out loans to pay for college, and the state ranks 12th in the nation for the number of students carrying debt.
A Joint Committee on Higher Education subcommittee approved a report Tuesday with nine recommendations to make higher education more affordable for Massachusetts students.
The recommendations were developed after lawmakers held seven public hearings at public and private colleges and universities around the state. The report now heads to the full joint committee, which could decide to develop legislation around the recommendations, according to Sen. Eileen Donoghue, D-Lowell, who co-chaired the subcommittee, along with Rep. Paul Mark D-Peru. Real post here: http://www.lowellsun.com/news/ci_25584755/student-loan-debt-solutions-needed
Student Loan Blog Posts:
1. Graduates Get Help Paying Student Loan Debt By Volunteering:
Graduates facing thousands of dollars in student loan debt often feel there is no relief in sight. However, a number of organizations and programs are popping up and aiming to take some of the burden in repaying massive student debt loans off young professional’s plates.
Such is the case in Chicago where a new organization pairs college graduates with non-profits looking for volunteers with specific skills. In exchange for their work, the volunteers get money to put toward the repayment of their student loans, DNAinfo Chicago reports.
SponsorChange.org, which also operates in Pittsburgh and Washington, D.C., assists busy young professionals in meeting their staggering monthly student loan bills, while also providing them with an opportunity to expand their job skills and networking. Everything here: http://consumerist.com/2014/04/14/graduates-get-help-paying-student-loan-debt-by-volunteering/
2. To extend student loans we must reduce student debt:
A Grattan Institute report I co-authored highlights student debt costs, with the finding that the government could save $800 million a year by retrieving unpaid debts from deceased estates and students who have moved abroad.
The report Doubtful debt: the rising cost of student loans found that 17% of the A$6 billion a year lent through the Higher Education Loan Program (HELP) is likely to be doubtful debt – loans that are not expected to be repaid. Total doubtful debt could reach $13 billion by 2017.
These debts have been building up since Australia pioneered income contingent loans for students with HECS in 1989. Unless people with student debt earn more than a threshold amount – $51,309 for 2013–14 – they don't have to repay their loan. These loans aim to reduce students' financial risks while keeping government education expenditure under control. End here: http://www.onlineopinion.com.au/view.asp?article=16209
3. How big of a dent in the economy will student loans cause?
Some students will be walking out of college with a degree, and up to $120,000 in debt. In fact, student loan debt is weighing in at more than $1 trillion, which is larger than credit card debt, according to NPR. A lot of post-undergrads are holding off on getting married, having kids, and Buying homes because of their financial situation. But this kind of hold off on buying could be a major hit to the economy in the next 10-30 years.
“These people aren’t investing in the kinds of assets that also produce income in the long run. So they’re not buying real estate, they’re not buying stocks, they’re not buying bonds — all kinds of things that not only produce asset wealth, but income wealth.” according to William Elliott, director of the Assets and Education Initiative at the University of Kansas, on NPR. More info: http://blog.timesunion.com/highschool/how-big-of-a-dent-in-the-economy-will-student-loans-cause/44293/