According to studies by the credit analysts and government audits, student loan defaults surged in the first quarter of 2013 as the constant efforts to collect bad loans are faltering. This is perhaps the latest twist in the student loan debt crisis that is hanging over the heads of the graduates and dragging down the already sluggish growth rate of the nation. Credit rating firm Equifax said that the entire nation owed about $3.6 billion in the form of government and private student loans and all of them were delinquent within the first quarter of 2013. The US Department of Education is of the opinion that 6.8 million federal loan borrowers are delinquent, thereby representing $85 billion in debt. The Department’s system for collecting bad loans is also struggling tough to keep up the payments.
The US Department of Education is not pursuing any kind of strict collection remedies and the borrowers are also not being able to take steps to remove their loans from the default status. The Department’s Education Spokesman regrets this delay and says that they’re taking active steps to work and resolve this problem. He also ensured that around $600 million of affected loans will be transferred in the coming few weeks.
Earnings Contingent Education Loan (ExCEL Act)
The legislation has been proposed to assist the students to repay their student loans but the sponsors of the bill disagree with the fact that a disastrous economic bubble is brewing within the United States of America due to increasing student loan debt level. Representative Tom Petri, who’s the co-sponsor of the ExCEL Act, would actually take steps to simplify student loan repayment by tying it with the salary level of the borrower and he too disagrees with the concerns of the alarmists about the impact that the $1.1 trillion student loan debt is having on the economy of the nation.
With the burgeoning student loan debt level, college education is becoming a distant dream. Gradually, more and more students are taking resort to debt relief options. Student loan debt was nearly $364 billion in 2005 but it tripled and climbed to a staggeringly huge level of $1 trillion in 2012. Last year, more than 70% students took out loans to complete their college and school education and each owed an average amount of $2700.
Student loan payments to be deducted from paychecks
This aforementioned bill will ask the employers to keep back a certain percentage of their salary (about 5-10% for newly-found jobs) in order to repay the student loans. This will be similar to the process for withholding tax. The amount that the borrower has to repay will increase with a rise in the salary and will decrease if there is a drop in the earnings. When the students complete their graduation and step into the field of jobs, they earn less. It is only gradually with the progress of their career that they start earning more. However, it is vital that all the provisions in the bill doesn’t create huge burden for the employers.
Deadline date for approaching help under the student loan bill
As there’s a firestorm brewing over the rise in the interest rates on the subsidized Stafford loans, it is pretty unlikely that the House will act quickly on the bill. Unless there is any involvement by the Congress, the present rate at 3.4% will double to about 6.8% by the end of July, 2013. The ExCEL Act is about to tie up the interest rates to the 10 year Treasury rate with an additional of 3%. As of May 3rd, the Treasury rate is 1.67% and this makes the fixed interest rate at 4.67%. The starting salary of the borrower will be taken into account in order to calculate the monthly loan payments under the ExCEL act.
Although this bill has been introduced, it would certainly take some more time to get through the Education and Workforce Committee. Polis and Petri are waiting for the report from the CBO (Congressional Budget Office) that will calculate the savings this new bill will bring as compared to the other programs administering student loans.
For up to date information regarding Student Loans please continue to visit us at www.StudentDebtRelief.us