Thursday, March 26, 2009

Is help on the way for student loan debt?

If Business Week, Daily Kos and U.S. News & World Report think it's an idea whose time has come, who am I to argue?

This strange mix of media outlets have recently run stories about the idea of forgiving student loans -- or at least finding ways to lessen the burdens of those saddled with whopping student debt.

Business Week noted on March 24 that "help is on the way" for those with federal student loans.



The Income-Based Repayment plan, part of the College Cost Reduction and Access Act of 2007, will provide some relief to federal student loan borrowers when it goes into effect on July 1. The program will cap most borrowers' monthly payments at less than 10% of their gross income for 25 years, after which any remaining debt will be forgiven. Another program, the Public Service Loan Forgiveness, allows borrowers to make income-based repayments and have their debt discharged after 10 years. "These programs actually provide some major help now and in the immediate future," says Irons of the Project on Student Debt.

But the situation is not quite as rosy for private loan borrowers. Many of these debtors have been unable to meet their monthly payments, putting their loans in forbearance for several years or, in the worst-case scenario, defaulting on their loans. Making matters worse for private borrowers is a clause in the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act that included private student loans as one of 10 debts that can't be forgiven in bankruptcy cases.



Read the entire article at
http://www.businessweek.com/bschools/content/mar2009/bs20090323_558993.htm

I'm one of the 144,000 members of the Facebook group Cancel Student Loan Debt to Stimulate the Economy. We all have horror stories to tell. Some members of the group have raised the point that the $500 we pay each month in student loans might be a better economic stimulus if we could spend it, rather than give it to a student loan conglomerate who uses it to line the pockets of their overpaid executives. It's well known that some of the same giant banks that bundled home and car loans also bundled student loans. The conglomerates made out like bandits, while we were left holding the bag of loans larded with compiling interest and collection charges.

It's consumer spending that stimulates the economy. After all, how many solid gold umbrella stands does one bank executive need? I understand that the purchase of gold umbrella stands contribute to the economy, especially if they are made in the U.S.A. and bought in the U.S.A. But it's a little-known fact that jobs in the the gold umbrella stand industry have all been shipped to Sri Lanka by those same executives who bought those umbrella stands during boom times for precious-metal accoutrements such as gold-flaked gourmet ice cream, gold-encrusted cell phones and 24-carat gold bullion doorstops. Not to mention those golden showers execs administered to us all.

But I digress, in the hummingbirdminds style.

What if that same $500 that went into an exec's gold umbrella stand budget line was instead spent locally on groceries, clothes, car repair and even umbrellas? What if there were thousands -- even millions -- of us doing that? Wouldn't that be better for the GDP and our local economies than the purchase of a few you-know-whats by you-know-who?

Think about it.

Meanwhile, check out a few other articles about student loan forgiveness on the CSLDTSTE group on Facebook at http://www.facebook.com/home.php#/group.php?gid=46657437878. Thanks to group founder Robert Applebaum, NYC.

3 comments:

Rob said...

Thanks for helping to spread the word!

jhwygirl said...

I'll be coming back to this tonight...as I have to get off to work - but this is a subject very near and dear to me. And my payments are 1/4 of my monthly take home pay. It's beyond burden.

Thanks, Mike.

Michael Shay said...

A huge burden for many. And now I have one kid in college and one two years away. Please add your insight to this issue.