Government profits to soar more than $700 million with new student loan rates

But she thinks it’s important for her children to get college degrees, even though her student loan debt could affect her ability to retire. “I think that I’ll still be able to pay it off. That’s my goal. I just can’t see not paying the debt,” Rose said. It is ironic since Rose, who lives outside Orlando, Fla., is director of housing for Consumer Debt Counselors, counseling people about their mortgage debt. Rose is just one of a new group of Americansparents struggling to pay off student loans even as their children take on new debts to pay for their own schooling.

Republican Rep. Tim Walberg, a member of the House Higher Education Committee, also cheered the move. “This is a win for students, families and taxpayers,” he said in a statement. But the CBO analysis shows it’s only a short-term win for students and families. While the CBO projects profits for the government each of the next 10 years, it shows that starting in 2016, the profit level will increase.

A negative subsidy exists when theres more money coming in than going out, CBO officials and financial aid policy experts agree. The CBO projections show an average subsidy rate of just over negative 20% for each of the next 10 years. That means the government will have 20% more coming in than going out. Thats an increase of 2 percentage points over what would have been coming in had Congress not passed this law. The government will particularly increase its profits on parent loans, with an average increase of 9 percentage points each year between 2013 and 2023.

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Bankruptcy Should Be An Option For Some Student Loans: Report

Debt that remains after 20 years is forgiven. Public service workers (teachers, nurses, and those in military service) will see any remaining debt forgiven after 10 years. All new loans will be direct loans delivered and collected by private companies under performance-based contracts with the Department of Education. [More from Personal Budgeting Tips ] Arguments for and against So far, reviews of the changes are mixed. On the plus side, there is stability.

Student Loans: The New Calculation

Under CAP’s proposal, a Qualified Student Loan would have to have interest rates that do not exceed caps established by Congress, would offer deferment and forbearance provisions, and would allow for income-based repayment. In addition, the institution at which the borrower enrolls would have to meet minimum standards for completion (i.e., graduation rates), job placement and evidence-based future salary projections. Non-qualified student loans in CAP’s model — like those with unaffordable repayment plans for students who enroll in ineligible education programs — could be discharged in Chapter 7 bankruptcy after a specified waiting period. “We know there is an increasing share of our adult population that has student loans, and that’s a trend that will continue for a foreseeable future,” said David Bergeron, co-author of the report and vice president for postsecondary education at CAP. “Some number of those will find themselves in the unfortunate circumstance in having taken out a loan with a excessively high interest rate and face the possibility of wage garnishment.” Another added benefit, CAP’s report suggests, is that the Qualified Student Loan model would push higher education institutions to improve their academic programs and ensure their graduates are getting real jobs in the fields they study.


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