The Government Accountability Office released a report stating that it will forgive over $108 billion dollars in student debt. Those who borrowed money from the United States government, and have fulfilled all of the obligations and rules, will have some or all of their debt forgiven. This is much more than initially thought.
It sounds like a great idea to help out students in need. But unfortunately, it’s a cycle of damage at the same time.
72% of all students graduating have debt, and many can never pay it off.
Student loan forgiveness reduces the Department of Education’s overall revenue. This makes it harder to fund loans and grants for low-income students.
Why is there such a big gap between the expected cost of loan relief programs and the actual cost we have been seeing this year?
There is a significant discrepancy between what everyone thought these programs would cost and what they actually ended up costing. Some reasons include:
- Increased Enrollment: The number of students enrolling in the loan relief programs has nearly tripled in the past year. Over 20% of enrollees have loans that are delinquent. This means they are not feeding significant revenue back into the system.
- Inflation: Many critics point out that the Department of Education did not account for inflation when they were calculating the program costs. The real program cost will remain unknown until all the loans are paid off. This is due to inflation. This could take up to or more than 40 years.
- The 108 billion dollar estimate only covered new enrollees. The $355 billion cost did not include all of all the people who were already enrolled in the program before the relief plans, or those who have not met the prerequisites to be considered for debt relief.
It is certainly possible that these laws may change in the future. In the meantime, students should take advantage of current legislation while they can. This will give them the best benefit for their own debt forgiveness. Only time will tell whether laws will affect how much any given student will end up paying towards their loans.
(Did You Know? Laws surrounding forgiveness and student loans are constantly changing. Don’t wait to take advantage of forgiveness or see if you qualify. Use the Definitive Guide to Qualifying for Student Loan Forgiveness to figure out if you can qualify and how to apply for forgiveness. Click here to learn more and get the free guide.)
The likely outcome is that some student loan forgiveness will stay in place, but some laws may change for future graduates.
Why do we need student debt relief?
Most of the debt relief which has been promised is only for students who have been defrauded by for-profit universities which failed to give loans on fair terms. To make matters worse, they often give students degrees which are not of value in the real world. However, most of these for-profit universities are now illegal. So there should not be much of an additional cost for forgiveness for these in the future.
Students will not be forced to pay back loans to fraudulent for-profit universities.
The Borrower Defense rule could be overturned in the future, but it is unlikely. It would be a long and arduous process. And it is difficult to argue against many of the benefits of the law, such as making sure students who go bankrupt or become gravely ill or injured will not have to take on the additional stress of financial woes.
Other at-risk groups who will be able to apply for loan forgiveness include:
- Those who are unable to find employment
- Anyone who has served in the military or other public service jobs
- Students attending medical or dental school
- Some people in some graduate programs
- Anyone in excess economic hardship
The idea is that if these students have more time or less debt to pay off, they are more to do it. Therefore, they’ll be able to become active participants in society and the economy.
The biggest problem is the difficulty of awareness and education. Many people simply don’t know that this law exists. So they are not applying for loan forgiveness even though they are almost certainly eligible. The government is currently working on figuring out how to advertise debt forgiveness programs to more students and communities. This includes both urban and rural areas. As long as the law is in place, communities will benefit big time. They’ll be able to improve their economy by having more people active in their workforce. This will create more flexible capital flowing to their local businesses.
The root of the problem
There are currently 44 million people in the United States who are struggling to repay their student loan debts.
Do you want to know if you qualify for student loan forgiveness?
Do you want a lower monthly payment?
Click here to schedule your free consultation with a student loan specialist. You’ll be able to speak with an expert who will give you all your options.
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