Congressman Ferguson wants major changes for student loan repayment programs.
At present, borrowers are paying their student loans under the five current income-driven plans.
This may go for to 20 to 25 years, depending on the repayment plan itself.
If Ferguson’s plan to change the current programs are passed, student loans should still be paid in full.
But it will no longer incur interest after 10 years.
However, this “change” is for private student loan forgiveness, and not applicable to public service loan forgiveness, as well as other loan forgiveness options.
(Note: Different types of loans qualify for different types of repayment plans … And making sure that you’re in the correct repayment plan can mean better benefits, lower payments, and averaged out lower interest rates (which means an easier repayment for you!) Download this free cheat sheet to repayment plans to make sure you are taking advantage of the best one for you. Learn more here.)
Change In Student Loan Repayment Programs To Empower Borrowers
Our current student loan repayment process is too complex, which only makes it more difficult for borrowers to successfully repay their loans,” Ferguson, R-West Point, said in an emailed statement. “We must empower borrowers to make active progress towards repayment. My bill would simplify the repayment process and give borrowers the opportunity to pay down their loans based on their income, reducing their risk of default.”
Perhaps most borrowers may agree with Ferguson on how our current repayment process is complicated.
In the event that you cannot afford to pay your student loans, applying for a forbearance can buy you some time.
However, if you neglect your student loans, they will increase over time due to accrued interest.
There may also be corresponding penalties if you fail to make the payment on time.
Student loan forgiveness, as its name suggests, releases or forgives the borrower with their current loan.
Both can help borrowers if they are struggling to make the payment.
The downside is that it doesn’t motivate the borrowers to pay off their student loans.
Instead, it just delays the payment.
The loan is still there and still continues to incur interest.
But if you limit the interest for up to 10 years only, it motivates the borrowers to pay off their loans.
This is much better than having to pay the loan itself, the interest it has accrued and is yet to incur.
The Silver Lining to Student Loan Repayment Programs
For borrowers who are already overwhelmed by their loans, this may be the silver lining they have been waiting for.
If Ferguson’s bill is passed, more and more borrowers will perhaps be more responsible in paying their student loans.
Capping the interest after 10 years will only apply to new loans and will take effect once the borrower has paid the amount they would have made based on a 10-year repayment plan, as well as any capitalized interest.
A Lighter Load For New Student Loan Borrowers
This bill will not make your student loans vanish nor 100% forgiven, but it will sure help paying off student loans.
Although the bill will be applicable only to new student loans, it can still help with student loans repayment.
The road to a debt-free life may still be a long way to go, but at least, the load can become lighter.
Watch this video from Bank of America for more information on student loan repayment programs:
(Pro Tip: Need a bird’s eye view of all the options available for student loan repayment? Download the 8-Plan Cheat Sheet. to Student Loan Repayment for free. Click here to learn more and grab your free copy.
What do you think about this bill? Let us know in the comments section below!