Student Loan Forgiveness Act Introduced in Congress

US House Representative Hansen Clarke from Michigan introduced HR 4170, or the Student Loan Forgiveness Act, on March 8th, a bill that is extremely important in this economy, especially to the Millennium Generation.  If passed, the bill would forgive outstanding student loan debt to any person who makes consecutive payments of at least 10 percent of discretionary income for ten years.  It also includes forgiveness options for going into public service or teaching.

This bill could not come at a better time and in many ways is extremely overdue given that student loan debt now exceeds credit card debt and is set to surpass 1 trillion in 2012.  Today’s recent college graduates (myself included) are faced with the worst job market post World War II, an ever increasing cost of living, and the highest rate of student loan debt in history. Rent, gas, and food are all substantially more expensive than 25 years ago when our parents were graduating from college.

The Project on Student Loan Debt reported that in 2010 two thirds of college seniors graduated with student loan debt and had an average debt load of $25,250, which would mean a monthly payment of around three hundred dollars.  My generation also has a 9.1% unemployment rate and if we do get jobs, they are generally entry level and might not pay that much, at least at first.  And people wonder why many of us are still living with our parents.  News flash: it’s because we can’t afford to pay rent, student loans, and buy food and gas.

While some might question why the government is concerned about student loan debt, it really comes down to the economy.  Given our substantial student loan burden the Millenial Generation is going to be spending less and holding back economic recovery.  Think about it this way: if you have to pay 300 to 500 dollars a month you’re not very likely to be able to have a lot of spending money, let alone enough saved to buy a car or a house.

Personally, I have a decent paying job with a non profit in DC and after I pay my rent, utilities, student loans, put money on my Metro card, and buy food I’m lucky if I have two hundred dollars left over.  Clearly I’m not going to be buying a car or house anytime in the near future, and am definitely not financially ready to get married, have kids, and start a family.  I’m joined in this predicament by an entire generation overburdened with student debt.  And while I applaud Representative Hansen’s idea and support the Student Loan Forgiveness Act, I don’t know if I can wait for ten years to have relief from my student loans.

While the Student Loan Forgiveness Act is a step in the right direction towards educational equality (why isn’t a free education a right, again?), it’s unclear whether it will even get passed in the House, let alone the Senate.  Simply, the problem of student debt is far from solved and work is ongoing.  For more information on the issue and what’s being done, check out Occupy Student Debt, the Project on Student Debt, and Forgive Student Loan Debt.

 

 


12 comments on “Student Loan Forgiveness Act Introduced in Congress

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  8. Honestly, when you think about it, this debt forgiveness will only hurt the economy. Case in point, a lower income student, who couldn’t afford college in the first place, takes out a $30k student loan. For some unknown reason, the student withdraws or drops out of school. Now that student owes the entire $30k. Now, this student applies and maybe receives student loan debt forgiveness. This student may be off the hook for a while, but now the US taxpayers are stuck paying back this money. I think that students should do more due diligence when selecting colleges. They should pick the ones that they can afford and who offer job placement afterwards to help pay for school.
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  10. Basics of Educational Loans

    There are three factors that you need to understand before applying
    for a Educational loan: Margin, Collateral and Repayments.

    Margin:

    Margin is the minimum amount that you have to pay as fees.

    Margins vary from 5% to 20% depending on the loan taken and whether the educational
    institution is in India or abroad.

    Collateral:

    Generally banks will ask for collateral security for
    all educational loans valued above Rs. 7.5 lakhs,
    however for the less than Rs. 7.5 million, banks obtains necessary personal guarantees from the parents or blood relatives or any collateral as per bank comfort.

    Collateral will be inform of Residential or commercial upto 100% of
    the coverage of educational loans.

    Repayment:

    Repayment will generally starts from the six months from the completion of course,
    it can be vary from 6 months to 12 months as per the course discretion.

    Simple interest is charged on the loan until the course ends.
    This interest (including holiday period
    interest) is added to the principal amount and the EMI is fixed.

    After six months, interest is charged on a reducing rate.

    The repayment duration is between 5-10 years.

    Banks may provide a 1% concession if the interest is serviced (paid) during the study and
    holiday period. In case you can service the interest, ask for the concession.

    Documentation:
    Required documents/KYC documents to apply for
    education loan:

    1. Signed Application form
    2. Two Passport Size Photos – Applicant and Co-Applicant
    3. Photo ID – Applicant and Co-Applicant (Any one of the following)
    • PAN educationd
    • Passport
    • Driving License
    • Voters ID
    • Employee ID
    • Photo ID issued by the Central Govt. or State Govt.
    • Bankers Verification/ Bank Passbook with photograph of account holder attested by bank
    4. Residence Proof – Applicant and Co-Applicant (Any one of the following)
    • Passport With Address
    • Bank Statement With Address
    • Driver’s License with Address
    • Utility Bill (Not older than 3 months)
    • Telephone Bill (Not older than 3 months)
    • Ration educationd
    • Latest LIC Premium Receipt (Not older than 3 months)
    • Leave and License Agreement supported with an address proof / utility bill
    in the name of the
    landlord
    • Voter’s ID educationd
    5. Academic Documents of Student
    • Marksheet/Certificate of 12th Exam
    • Marksheet/Certificate of Subsequent Years of Education e.g.
    BE, BCom, BSc, etc.
    • Marksheet of Any Entrance Exam Taken e.g. CAT, CET, etc.
    (If applicable)
    • GRE/GMAT/TOFEL/LETS, etc Marksheets For US Applicant
    • Scholarship Documents (if applicable)
    6. Proof Of Admission (If available)
    • Printed Admission Letter From the Institute on its Letterhead With Institute’s Address
    • I-20 Form for the USA Applicant (If any)
    7. Last 8 Months Bank Statements of Co-Applicant (If more than
    one bank account, provide copies of all)
    Make sure to include the bank statements of the Bank Account where Salary or Business or
    Professional receipts are credited every month.
    8. Income Proof of Co-Applicant

    In case of Salaried Employee (All the following)
    • Latest 3 Salary Slips or Salary Certificate on Employer’s Letterhead
    • Last 2 year’s Form 16 from Employer or Last 2 Year’s Income Tax Returns
    • Any Other Income Proof That is Not Reflected in the Above Documents

    In case of Self Employed or Professional (All the following)
    • Last 2 Year’s Income Tax Returns
    • Last 2 Year’s Certified Financial Statements or Provisional Financial Statements Duly
    Certified by CA
    • Proof Of Office (any one of the following, Lease Deed, Utility Bill,
    Title Deed, etc.)
    • Any Other Income Proof That is Not Reflected in the Above Documents

    Accepted Collateral and documentation

    The following types of collateral are accepted
    1. Residential Flat
    2. Residential House
    3. Non-Agricultural Land
    4. A Fixed Deposit

    Collateral Documentation- Immovable Property (Flat, House,
    Non-Agriculture Land) (All the Relevant Documents from
    the Following List)
    • Property Title Deed
    • Registered Sale Agreement Along With Society Share Certificate
    • Original Registration receipt for the above agreement
    • Allotment Letter By Municipal Corporation / Authorized Govt, Commencement Certificate from Municipal
    Corporation/Council
    • 13 years or 30 years of Title Search (Previous Chain of Sale Deed establishing title) of the property.

    • Any other document as prescribed by our empanelled lawyers or chartered
    engineers from time to time
    Interest rate:

    Rate of interest will be floating rate of Interest, generally linked with the base rate of the
    banks, Present Scenario the Rate of Interest will be
    11.5% to 15.0%.

    Rate of Interest vary on account of a number of factors such
    as student’s academic background, employability
    of the selected course from a selected college and country of study, financial strength of the co-borrower, loan
    repayment capability, credit history, collateral offered or not.

    Loan Do’s and Donts
    Do’s
    1. Pay interest of Educational loan since from the availing of loan from Bank/Financial
    Institution.
    2. Otherwise, once you graduate that interest will begin to accumulate interest as well, which is
    called compound interest.
    3. Try to get the collateral backed loan, which will cost you lesser Rate of Interest and Easy process of loan.

    4. Try to get financial aid from the colleges to meet your educational
    needs, this will help you to reduce the
    Educational loan burden on you to further extent.

    5. After you graduate, take the opportunity to pay down the principle of your loans while you’re in a position
    to pay. Typically, loans are on deferment for six months
    after your graduation. This is so you have time
    to find a job.

    Dont’s
    1. Don’t rely on your parents to repay out a loan.

    2. Some Banks give you more money than what you owe in tuition.
    These are called refunds. Don’t take out
    loans that are in excess of your tuition.
    3. Try to meet other college costs by using your savings
    or setting up a payment plan. Loans that provide
    refunds can only cause temptation.
    4. If you do get a refund, don’t spend it. This money
    is supposed to be used for meal plans, supplies or
    books. When you receive that check, don’t be foolish and use it on personal things.

    5. Don’t assume that everything in your paperwork is what it should be.
    Make sure to read over all forms you
    receive. Most promissory notes explain what you must pay back
    and when you must begin to pay it. Be
    sure that you agree to all terms before signing anything!

    6. Don’t take too much time off of school. If you choose to take a semester off, you’ll be fine, but if you take
    off more than that, banks will begin to send you
    bills for your loans.
    Problems@ Educational Loans:
    1. The amount of margin money required cannot be raised by the student.

    2. Students who want to study abroad may need to take a loan that is more than
    the value of the collateral put
    up.
    3. Income level of the guarantor is too low or the guarantor
    doesn’t have credible CIBIL record.
    4. It is difficult to prove that the college the applicant is going to is a valid college.

    5. Applicant’s documents are not in order.
    6. If a student is studying abroad, there are a lot
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    accounted for the time that will be consumed.
    7. ApnaLoanBazaar will help you to complete all the formalities with
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    8. In today’s scenario a lot of banks are apprehensive about
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    is little guarantee that the applicant can get a job there after his/her course is over.
    You also have to take into
    account that the number of fake institutions abroad are rising and duping
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    9. There is no one in the applicant’s close family
    who has a CIBIL credit history.

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