Student Loan Forgiveness Scam Calls
13. If the rational for excepting student loans from discharge is that the cost to students to obtain loans would soar this fact would seem to lay waste to that argument. In the wake of the slow march towards saddling our students with unshakable debt the government created a couple of ways to deal with government backed student loans outside of bankruptcy. In 2007 the College Cost Reduction and Access Act of 2007 added income based repayment which allows for a smaller repayment than income contingent repayment 15% of discretionary income and debt forgiveness after 25 years. 14. In 2010 the Health Care and Education Reconciliation Act of 2010 created a new version of income-based repayment cutting the monthly payment to 10% of discretionary income with debt forgiveness after 20 years. 15.
Student loans are basically non-dischargeable almost everyone knows this. There are some very specific circumstances where even today you can have your student loan debt discharged but that is a narrow exception that often requires a fight and money to fight. We will discuss the current state of dischargeability in a future post. The landscape around student loans and bankruptcy has not always been so desolate. Not so long ago these loans were dischargeable. Back when they were dischargeable the cost of an education was much lower and the total student loan debt was a fraction of what it is now. With student loan debt currently being a 1200000000000.00 (One Trillion Two Hundred Billion) dollar problem holding people back from purchasing homes or taking part in the broader economy with a little help they may become dischargeable yet again.
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A Brief History. Student loans really did not pop into existence in America until 1958 under the National Defense Education Act. 1. These loans were offered as a way to encourage students to pursue math and science degrees to keep us competitive with the Soviet Union. 2. In 1965 the Guaranteed Student Loan or Stafford Loan program was initiated under the Johnson Administration. Over time additional loan programs have come into existence. The necessity of loans for students has become greater as the subsidies universities receive have fallen over time. Take Ohio State for example. In 1990 they received 25% of their budget from the state as of 2012 that percentage had fallen to 7%. In the absence of state money universities and colleges have increased tuition to cover the reduction in state money.
Last week financial aid officers at Texas A&M University - a school with over 54000 students - heard from seven different lenders warning that they would no longer be able to offer federal student loans a situation that has made more than a few borrowers uneasy. Dyneche Duffield an incoming college student headed to Houston Baptist University is uncomfortable with the prospect of having to establish a relationship with a new lender other than her local bank which used to offer student loans. "I would have much rather taken out a loan there than somewhere where I didnt know anyone" Duffield said. While students like Duffield may still be able to go directly to the Department of Education for their federal college loans or find those remaining lenders who are still offering private student loans (albeit with more stringent credit criteria that are making it harder for students to qualify) the magnitude of the problem within the student loan credit markets and how deeply it has permeated the college loan industry is alarming to many administrators and officials in higher education.