Kelly Mason
Staff Reporter
U.S. Rep. Hansen Clarke, D-Detroit, proposed a national bill, named the Student Loan Forgiveness Act of 2012 (H.R. 4170). The bill, if passed, would forgive outstanding student loan debt for all Americans who have made payments equal to 10 percent of their discretionary income for 10 years, according to Rep. Clarke’s website.
“This bill provides that if a student loan borrower makes payments equal to 10 percent of their discretionary income, for a period of ten years, the balance of their federal student loan debt will be forgiven,” said Rep. Clarke when proposing the bill to Congress on March 8. “This provides student loan borrowers with a second chance, those who have been struggling financially, and by cutting this debt, this frees up their money to invest on their own, that will create new jobs throughout this country.”
On Tuesday, April 11, Congressman Clarke held a Google+ Hangout Session to discuss the act. Student representatives from Western Michigan University, Oakland University, and numerous other Michigan colleges participated in the hangout session to talk about the bill and the realities that many student borrowers are currently facing.
Local political activist John Curran found out about the online conference through the congressman’s Twitter account and started following the news about the bill. He said that each university involved in the hangout had the opportunity to ask questions regarding the potential legislation.
“One of the key features is that it will tie your monthly payments to income,” Curran said. “For a lot of folks who are graduating with the tough job market right now and for a lot of people that are either finding themselves living at home, unemployed or not able to find a job that represents the value of their education, this caps payments at 10 percent of your income.”
This bill would amend the Higher Education Act of 1965 by giving borrowers the option to enter the, “10/10” loan repayment plan. The borrower’s discretionary income will be defined as any annual income exceeding 150 percent of the poverty line for an individual or family. This bill would also allow graduates who enter public service professors (such as teachers and first responders) to have their loans forgiven in five years instead of 10 as well as cap interest rates on federal loans at 3.4 percent.
“There is a potential for a student loan bubble, much like the housing bubble, but on a much smaller scale. If that bubble were to burst, the loans are overvalued and not representative of that value and the benefits of going to college,” said Curran. “A large number of people would default on those loans. It could have a serious negative effect on the economy as a whole.”
The amount of student loan has skyrocketed in recent years to a total of $867 billion last year. During the 2010-2011 academic year, students and families borrowed $104 billion in loans from the Department of Education, a 50 percent increase over three years.
“The driving goal of the bill is to make it easier to pay back loans,” said Curran.
Over the past several years, students and parents have continued to take out more loans to cover the steadily-increasing cost of education. Considering the job market, people who acquire all this debt then go out into the work force, they either have trouble finding work or finding jobs that don’t pay enough to cover the cost of their loans, and that’s what causes more trouble in the economy.
“It’s time for Congress to stand for the rights of student loan borrowers,” said Clarke. “It’s time to forgive student loan debts.”
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I think some of the other options the government should seriously look at offering are the following:
1. Interest rate reduction
2. Significant reductions in the interest already accrued and/or elimination of all interest accrued if original loan principle paid off in lump sum or up to maximum of 5 years repayment terms….
3. Forgiveness of remaining balance for those that have already repaid a minimum of their original loan balances or more….
well, that’s my 2 cents
Not Only must the loans be forgiven, but the Amount they forgive must be made EXEMPT from Cancellation of Debt Income (CODI). Other wise, the amount that is forgiven, is then taxed as income.
So lets say your loan was 15k, and over 15 years grew to 99k, and that is what gets forgiven. Filing single no dependents, your tax is about 20k – for federal. Then you have to pay state income tax on top of that (for those who live in a state with an income tax).. so unless they also make the loan forgiveness, tax exempt, then this whole thing is just another smoke screen, another case of politicians blowing smoke up our tails.
Government would do itself and the rest of the country a service if they would just eliminate the interest and penalties and allow students to pay back what they borrowed. Then even the folks in default would try to make payments.
After all, it is the compounded interest upon interest upon interest and penalties that kill a person financially with student loans.
Does anyone know when this bill will be voted on? Any kind of an estimate? I can’t find that anywhere online…Thanks!
I love this idea. I hope to God it passes. We are not trying to get out of the loans, although forgiveness would be wonderful, but with the interest rates so high, it is hopeless for many people to pay off their loans and that is just not right!
This is a bad idea. The government is already broke. For them to say we are not going to require people to give us back the money we let them borrow is only digging a bigger hole for themselves. Loan forgiveness doesn’t make student loan debt disappear, someone somewhere is going to have to pay that money, and guess who that will be??? Taxpayers. The very people who are being “forgiven” will end up paying for not only their loans, but everyone else’s loans. So the people who don’t have student loans, those who worked their way through school so as to not be in this position will then end up paying for those who took our excessive loans to pay for their lifestyle while they were partying in school and not working. If they really want to give people a break, delay interest for 10 years. If by that time the loans are not payed off then start charging interest.
What turnip truck did Clarke fall off of? Does the term promissory note not register to him? Each student loan borrower is given full disclosure of their rights and responsibilities before they agree to repay their loan. Perhaps Mr. Clarke would consider sponsoring a bill that would allow me to have my house mortgage forgiven because times are tough! What has happened to America? Everyone needs to take responsibility for themselves; emotionally, politically and financially. Yesterday was tax day. We had to pay an additional amount for income that was not taxed during the year. What a great problem to have! I wish the tax brackets were lower but I am glad to have this problem because it means we had income from work and investments that we are responsible for. I paid back my student loan; with interest. I am tired of hearing the complaining of students who think this country owes them something. You made the promise; it is time to keep your promise!
I was hoping to see something about private loans. Those are REALLY out of control!
What about the students (like myself) who responsibly lived at home for two years to save money and pay off my student loan debt. Do I get money back from the government for trying to be responsible instead of enjoying myself like most others and move out?
I lived at home for 4 years while paying back my private student loans. Do I get taxpayer reimbursement for underconsuming all that time so as to pay off my debt? We shouldn’t be so quick to break contracts that students willfully signed.
Student loan forgiveness is very helpful in the solution of having a high loan in the country. More and more often, it is common for students to take out multiple loans in order to pay for their college education. There are five basic ways a graduate can qualify for federal student loan forgiveness: volunteering with qualifying programs, performing military service, teaching in specified communities, practicing medicine within certain areas, and by meeting various other miscellaneous criteria that appear within the forgiveness program. You can also visit http://federalstudentloanforgiveness.info/ to have a guidelines on how to qualify for these student loan forgiveness. Good luck!
Paul – That may be true, but at the end of the day when people stop paying their student loans anyways what’s the point? Just like the housing bubble only difference is the banks can’t come and take my degree. Yes taxes may rise but that is going to happen regardless becasue people are going to default. Also, at least this gets people to pay for 10 years instead of instandly defaulting.
A 10 percent cap on student loan payments sound like a great idea. It will give new graduates a much needed breathing space, so they can find a good job, etc.