Benefits for Massive Amount of Borrowers
If elected, Hillary Clinton’s plan for Student Loan Forgiveness. Would undoubtedly benefit massive amounts of borrowers. Under her proposed plan, Clinton would allocate roughly $115 billion to student loan forgiveness and would provide potential benefits to over 60% of individuals with student loans (25 million borrowers!). This $115 billion is a third of her proposed $350 billion “New College Compact.” In total, the plan could save student loan borrowers billions of dollars every year.
Here are the key goals of Mrs. Clinton’s plan:
- Help an estimated 25 million borrowers by allowing them to lower their payments by refinancing at current interest rates
- Establish a mandatory three-month moratorium on all student loan payments, giving borrowers the necessary time to work with the Department of Education to consolidate, refinance, or negotiate different repayment plans (with an “opt-out” feature as interest would still accrue during this time)
- Shorten all income-based repayment programs to 20-year student loan forgiveness plans (this currently varies between 20 and 25 years based on the program)
- Massively expand income-based repayment plans to ensure that ALL borrowers going forward never having to pay more than 10% of their disposable income toward student loans
- Open up forgiveness and payment relief to approximately $90 billion worth of private student loans that currently have very limited options
- Reward Employers who assist employees with their student loans (via student loan repayment benefits) with a payroll tax deduction
- Encourage entrepreneurship by offering three years of loan deferments (with no accrued interest) so borrowers can apply for that money instead to starting small businesses, with the possibility of expanding this offer to the first 10 to 20 employees of a new company
- For those who either launch a new business in a distressed community or an enterprise that provides a measurable social benefit, loan forgiveness for up to $17,500 will be available after five years (the exact definitions of “distressed community” and “measurable social benefit” have yet to be defined)
The cornerstones of Mrs. Clinton’s student loan forgiveness plan are relatively simple and rely on three basic principles:
- Refinancing federal student loans by cutting the interest rates roughly in half (also ensuring the federal government does not profit further from student loans)
- Make refinancing available to borrowers with private student loans that are current on their payments
- Collapse all income-based plans into one much broader and more generous plan that is straightforward and easy to enroll in
“. . . everyone who has student debt should be able to finance it at lower rates.”
The Plan Provides Forgiveness via Lower Interest:
Cutting the interest rate in half would save the average student loan borrower roughly $1,000 per year! This will result in billions of dollars of savings for student borrowers.
The Plan Expands Benefits to All Types of Borrowers:
Hillary Clinton’s student loan forgiveness program creates the best of both worlds for both federal and private student loan borrowers…
- For federal student loan borrowers: They would get access to the low rates previously available only through private student loan refinancing.
- For private student loan borrowers: They would get access to the forgiveness and protection of income-based repayment plans that federal student loan borrowers have.
Student Loan Forgiveness for Defrauded Student Borrowers:
Mrs. Clinton specifically highlights streamlining the process for providing student loan forgiveness for borrowers defrauded by Corinthian and other predatory for-profit education companies.
The Plan Holds the Student Loan Servicers Accountable:
Mrs. Clinton’s plan would force student loan servicers to increase significantly and improve the services they provide struggling borrowers. Specifically, the program encourages:
- Improved ease of enrollment
- Counseling for Borrowers
- Help for borrowers who are delinquent on their loans
- Strong enforcement against servicers and bill collectors who are breaking the law
Other Student Loan Forgiveness Aspects of the Plan:
AmeriCorp Student Loan Forgiveness:
As a means of attempting to expand AmeriCorp’s ranks from 70,000 to 250,000. Mrs. Clinton’s plan suggests teachers and those that complete AmeriCorp’s service program become eligible for student loan forgiveness.
- Opens up the plan to a huge number of borrowers
- The interest rate change alone would save borrowers tens of billions of dollars. (It seems like a no-brainer that a government committed to higher education of its populace would not be profiting from lending to its students!)
- Establishes a mandatory three-month moratorium on student loan payments, giving all borrowers the necessary time to renegotiate their plans
- Shortens all income-based repayment programs to 20 years
- Expands programs to include private student loans
- Ensures that ALL borrowers going forward never have to allocate more than 10% of disposable income towards their student loans
- Rewards employers who assist employees with their student loans through payroll tax deductions
- Streamlines the process of student loan forgiveness for defrauded borrowers
- Forces student loans servicers to improve their services significantly to help struggling borrowers
- Offers student loan forgiveness for teachers and those that complete AmeriCorp’s service program
- No mention of the tax bill from student loan forgiveness at the end of 20 years—this should be made tax free
- No mention of bankruptcy as a mechanism for helping borrowers
- Promoting the financing of new businesses with money previously applied to student loan repayments appears hazardous.
Student Debt Relief’s Opinion:
While none of Hillary’s ideas about student loan forgiveness in the plan are revolutionary, the massive size and scope of her plan would go a long way to helping borrowers. Aforementioned answers a near sound strategy overall.
However, we question the wisdom of encouraging those with little to no real world business experience to apply student loan payments toward financing risky new ventures (most of which fail in the first few years) only to be that much further in debt afterward. While we wholeheartedly support the entrepreneurial spirit of young people, we think there are much more pragmatic approaches available.
The key to real long-term success in helping student loan borrowers will be in how effective the government is in curbing the rapidly escalating cost of education going forward.
We’ll keep our fingers crossed.
To learn more about this plan from Mrs. Clinton’s website, click here.
To learn more about Donald Trump plan click here.
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Student Debt Relief Loan Refinancing Advertiser Disclosure
College Ave: College Ave Student Loans products are made available through either Firstrust Bank, member FDIC or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.
College Ave Refi Education loans are not currently available to residents of Maine.
1 – The 0.25% auto-pay interest rate reduction applies as long as the borrower or cosigner, if applicable, enrolls in auto-pay and authorizes our loan servicer to automatically deduct your monthly payments from a valid bank account via Automated Clearing House (“ACH”). The rate reduction applies for as long as the monthly payment amount is successfully deducted from the designated bank account and is suspended during periods of forbearance and certain deferments. Variable rates may increase after consummation.
2 – $5,000 is the minimum requirement to refinance. The maximum loan amount is $300,000 for those with medical, dental, pharmacy or veterinary doctorate degrees, and $150,000 for all other undergraduate or graduate degrees. Information advertised valid as of 04/26/2019. Variable interest rates may increase after consummation.
3 – This informational repayment example uses typical loan terms for a refi borrower with a Full Principal & Interest Repayment and a 10-year repayment term, has a $40,000 loan and a 5.5% Annual Percentage Rate (“APR”): 120 monthly payments of $434.11 while in the repayment period, for a total amount of payments of $52,092.61. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary.
ELFI: Subject to credit approval. Terms and conditions apply. To qualify for refinancing or student loans consolidation through ELFI, you must have at least $15,000 in student loan debt and must have earned a bachelor’s degree or higher from an approved post-secondary institution.
LendKey: Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
CommonBond: Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate.
Splash Financial: Terms and Conditions apply. Splash reserves the right to modify or discontinue products and benefits at any time without notice. Rates and terms are also subject to change at any time without notice. Offers are subject to credit approval.com
Earnest: To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest’s fixed-rate loan rates range from 3.89% APR (with autopay) to 7.89% APR (with autopay). Variable rate loan rates range from 2.50% APR (with autopay) to 7.27% APR (with autopay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms of 10 years or less. For loan terms of 10 to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 0.26% and 5.03% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of April 23, 2019 and are subject to change based on market conditions and borrower eligibility.
Auto Pay Discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 04/23/19. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice.
Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 303 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, e-mail us at email@example.com, or call 888-601-2801 for more information on our student loan refinance product.