President Obama recently proposed a new Student Aid Bill of Rights to help take action on the student debt problem, and provide borrowers with more rights and protections. With the current average borrowers student loan debt at $28,400, and the average default rate at nearly 14%, its neither a surprise nor secret that the country is facing a very large crisis due to student loans. President Obama has been a champion of student loans, already having created the Pay As You Earn Repayment Plan, as well as making changes to the current forgiveness programs which has led to people calling it the Obama Student Loan Forgiveness program.
I. Have access to a high-quality, affordable higher education
Higher education continues to be one of the best investments one can make in their own future, so the importance of a college education has never been more important. In January 2015 President Obama proposed a bold plan of making community college completely free for students. This plan would potentially help 9 million people, and make the first two years of college free to students who start their degree at a community college.
College Rating System
The Department of Education is also currently working on developing a rating system for colleges which is expected to be completed by the start of the 2015-2016 school year. This system would provide a measurement that would be easy for anyone to compare colleges with actual data based on historical performances of each college.
Data Used To Rate Colleges
- Average net price of attendance – The average cost a person will pay to attend the school
- Graduation rates – The average number of students who attend and graduate from the college
- Transfer Rates – Measuring students who transfer in, and who are not happy and transfer out of the college
- Employment Rates – Measuring the success of the students in their field of studies post-graduation
- Loan Performance – How well are the students able to repay their loans after receiving their degree.
II. Be Able to easily find the resources they need to pay for college
With the cost of tuition on the rise and higher education continuing to be one of the best investments one can make in their own future, the President realizes the need for people to have access to federal funds to help pay for college. President Obama has helped make aid easier to obtain by increasing the maximum Pell Grant by $1,000 as well as modifying the American Opportunity Tax Credit to be able to claim up to $10,000 as a tax deductible over four years of college.
Simplification of the FAFSA
Further, the Department of Education has simplified the Free Application for Federal Student Aid(FAFSA) application. The average time it takes someone to currently complete this application is 20 minutes, reduced from the initial length of over one hour. The Department of Education has streamlined part of the application to be internally link to the Internal Revenue Database. This allows the Department of Education to view financial records directly through the IRS, instead of having the borrower complete that section of the form. The President has also requested to remove more questions from the application to make it even easier, and to put less restrictions on applying.
Tax Debt Elimination for Forgiven Student Loans
Under the American Opportunity Tax Credit, President Obama has also proposed eliminating any tax debt on student loans forgiven under any of the income driven repayment plans. This would include the Income Based, Income Contingent, and Pay As You Earn repayment plans. Currently, any loan forgiveness may end up with the borrower receiving a 1099-c for the amount forgiven which would need to be claimed on income tax returns. If the proposal of eliminating this tax liability goes through, many borrowers would see light at the end of the tunnel with their student loans.
III. Be able to choose an affordable repayment plan for student loans
Since currently 14% of all student loans are in default status, the President has committed to providing borrowers with affordable repayment plans for their student loans. In December 2012 the Pay As You Earn repayment plan was passed into law. This repayment plan allows borrowers to make affordable monthly payments on their student loans at a maximum of 10% of their discretionary income. This means that new borrowers can always have affordable payments for their student loans, with payments as low as $0.00 per month with loan forgiveness after 20 years.
With the income driven plans, there is almost never a reason for a borrower to be in default on their loans if they are adequately educated about their repayment options. Unfortunately, many of the lenders are not doing a good job of educating their borrowers, and often times the consumer falls into default after seeking help and contacting their lender. This leads into the next student aid bill of rights point.
IV. Receive quality customer service, reliable information, and fair treatment when repaying loans.
As we have previously reported, the Department of Education has found problems at Sallie Mae, the largest student loan lender in the United States. Issues such as miscalculation of income based payments, charging unlawful interest rates on student loans to military members, and unlawful late fees being charged to borrowers. The Department of Education has tried to incentivize servicers to find ways to best serve their borrowers. Lenders are now compensated better depending on the help being provided to borrowers on repayment of their loans and quality of their customer service. The Department of Education will further make sure that all debt collections practices are fair, transparent, and that the fees charged for collecting the debt are reasonable.
Educating Borrowers via Social Outreach
The Department of Education has also created a social media campaign trying to target student loan borrowers to help educate them on the options available. An estimated 3.5 million borrowers were contacted from November 2013 to December 2013. The campaign was focused most on loan repayment options, common mistakes, and general student loan advice.
Student Loan Counseling Tool
The Department of Education created the Student Loan Counseling Tool in 2012 to help educate borrowers who have not yet received loans, and those with existing loans. This can greatly help those in high school who have no knowledge of how loans work, and the gravity of the situation when borrowing many thousands of dollars to pursue a degree. The tool also provides financial planning tips, and provides an estimation of what their debt is likely to be after graduation.
Centralized Student Loan Complaint System
The Secretary of Education will create a website that will give borrowers a simplified and centralized place to file complaints about federal student loan lenders. The borrower would be able to track the complaint and see what type of resolution would be provided to the individual complaint. The DoE would also be able to use all the data collected to evaluate the performance of the servicers. The complaint system would be used for complaints against lenders, servicers, colleges, and collections agencies.
Do you think these new proposed ideas will help the student loan situation in our country? Leave a comment and let us know your thoughts!
No, this isn’t helping those this government wants to continue to screw out of money for an education that schools advertised we would get and didn’t.
So, you didn’t get the job you expected and can’t pay back your loans. How does this NOT help? $0.00 payments, loan forgiveness, AND tax liability waived. Sounds amazing! I’ve been paying for 15 years with no end in sight. I’ll takes that debt forgiveness in 5 years, thank you. You can continue paying up the wazoo and wind up paying more than triple what you borrowed.
What college did you go to? Because it certainly didn’t teach you reading comprehension of math. Maybe that’s why you didn’t get the job you were expecting. Jobs don’t come assigned with your diploma
This is a great program for unemployed or underemployed students, however, it is concerning that it is needed. There should be more higher paying jobs available. But that doesn’t just happen over night, nor can the government control such things. This program will help many people, yes, but at what cost? All that borrowed money comes from somewhere. So when lenders lend money, they should be relatively assured that they will get that money back, with interest as incentive. If too many people are defaulting at a massive scale, then it could wreak havoc on the banking institutions – and the system as a whole could suffer. On the plus side, it at least provides some much needed protection for students by establishing guidelines for treatment of them. No student should be harassed or mistreated or intimidated in any way in an attempt to recoup loans. Is it an important obligation? Yes. But if we are being truly honest here – what real choice do people have these days but to go to college on borrowed money, get their degrees, and try to find decent work? Not all of us can be famous musicians or movie stars – nor should we be subject to a life of poverty working at McDonalds – nor should that be a legitimate career for heads of households. Most of us were nearly brainwashed with the message “go to college or be a homeless bum.” Like I said, if we are being honest here – where is the choice in that? Not much of one.
I have parent plus loans my income is limited I,m 67 years old and retired. Please advise what kind of assistance is available for me.
I would look into the income contingent repayment plan. Could offer you a $0.00 monthly payment since you are retired and presumably not planning on reentering the work force.
I went to a computer school and before signing up for it I told the woman who handled the financing at the school I needed a loan grant that didn’t have to be paid back. She said fine and in the end I wound up not only with her doing a pell grant she did a regular student loan, which I didn’t find out that until it was all done. When I told her to cancel and un-do it she said she couldn’t and I was stuck with it. I told her that I didn’t want to take the class she had signed me up for programming I wanted to take repair. She said there was no opening in repair and I said refund my money and un-do this and she informs me that even if I don’t go to the class they will keep my money. Needless to say I took the class once I found this out and have not been able to apply any of it to a job. I am on SSI and told her I was trying to generate income from home and was good at repairing things but did not get trained for that. I now have a loan that I have had in deferment for years and the loan should be forgiven. The school was a scam and sham and I got screwed. I wasn’t going to let them keep the money and not take a class and I thought I might learn something so I went ahead and why not since she made it clear I would have the loan if I attended or not. When I told her to cancel it before even starting class she should have done so but told me she couldn’t. People like this should go to jail it’s a modern age extortion. Now here I am on a fixed income do to illness and stuck with a loan while she made her commission and laughed all the way home when she should be crying all the way to jail.
I have a student loan since 1986 trying to pay it off but un able now it’ it is 600%wat it was with interest and frees over the years and when u don’t pay they send it to the irs it has landed on my credit file a few times which after the first 7 years it is not legal
My son has just graduated from school and not working at all.I want him to start his career and life,but the loan forgiveness is not really happening.So,what can be done?
Look into Income Based Repayment Programs. These are free federal programs, for a fee, we help navigate these and prepare the documents to get him in the one that is best for his situation give us a call at 1-844-669-4407 if you’d like our help
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