Student debt forgiveness may not be all it seems
Just mentioning student debt sends a chill down every student’s spine. As many college students try so desperately to forget, debt is a ghost that’s coming for most people after graduation.
The ghost looming over college students is gigantic. The graduating class of 2014 walked across the stage receiving not only their hard earned diploma, but an average of $33,000 in student debt, according to a government data analysis by Edvisors.
Emily Vaartstra
In the past, the government has done little to help college students. State funding on higher education has been down 23 percent since 2008, according to a May 2014 report from the Center of Budget and Policy Priorities (CBPP). This report also detailed a decrease in state funding since the recession has resulted in a 28 percent tuition increase in public colleges and universities. For Idaho, the CBPP found there was a 36.8 percent decrease in state spending per student between 2008 and 2014 — the sixth largest decrease in the country.
Now, you may be thinking that President Obama’s Student Loan Forgiveness plan will save students from being outlived by their loan. But the forgiveness of student debt sounds so much sweeter than it actually is.
The key word here is “forgive.” When one usually uses the word, it is meant as a letting go of something — be it anger or debt. So according to that definition of forgiveness, Obama’s Student Loan Forgiveness Program should literally be the stoppage of requirement to pay money owed.
The bad news is that this program is far from this definition and has quite a lot of stipulations that come with it. To be fair, it’s not like the over trillion dollars of U.S. student debt can just disappear into thin air.
Here is what President Obama’s Student Loan Forgiveness Program does offer students, according to Student Debt Relief.
First, students who took out new loans starting in 2014 will qualify to make payments based on 10 percent of their discretionary income. So if you took out loans before 2014, you don’t qualify for this benefit.
Second, new federal loan borrowers are eligible for student loan forgiveness after 20 years, rather than 25 years on qualifying payments — that means most college students will likely be in their mid-40s by the time their loans are forgiven. Once again, all older borrowers are out of luck but new borrowers get to have five less years of loan payments before they are forgiven. Also, students will still have to pay taxes on those forgiven loans after the fact, since they count as taxable income.
Money from this program will go toward funding poor and minority students and increasing college funding.
This is where things get even stickier. There is already a good amount of funding in place for poor and minority students.
The real issue is students who come from middle-class families. These students don’t qualify for Federal and State Financial Aid because their parents make too much money — yet those students still have to pay for their own tuition in many cases. Therefore, they take out whatever student loans they can and graduate with an average of $33,000 in debt. But don’t worry — after 20 years of payments they will qualify for loan forgiveness.
While the reality of student debt is still quite bleak, the important thing to remember is that at least some changes are being made. In a couple of years, we’ll hopefully be able to see what kind of a difference the changes have made.
Emily Vaartstra can be reached at [email protected]