Category Archives: Student Loans

Is Trump and DeVos at Fault with the Failure of the Federal Student Loan Forgiveness Plan?

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Revised Student Loan Forgiveness Plan Fails Graduates Again

For millions of students and graduates across the United States, a student-loan forgiveness plan could alleviate the sky-high costs of higher education. FedLoan Servicing has advertised its recent loan forgiveness benefit for the better part of the past two years, but the company kickstarted its new program by denying nearly all candidates who applied. At this point, government officials from across the political spectrum are concerned about FedLoan’s ties with the Education Department. Is there reason to suspect a growing coalition between third-party loan agencies and the Federal Government?

What is a Student-Loan Forgiveness Plan, and Whom Does it Apply to?

It’s important to take a closer look at what a federal student-loan forgiveness plan is designed to accomplish. Rather than diminish costs equally for anyone with student loan debt, a forgiveness plan is designed specifically to benefit those who meet certain loan and employment criteria. The two most important factors are the size of an individual’s loan and the type of work he or she engages in after graduation. For example, professions such as teaching and social work have a reputation for strong loan relief options.

Teachers, social workers, firefighters and other service professionals make up the group that felt most betrayed after the initial wave of application denials in 2017. In 2007, these professionals were provided a clear option to lighten their debt under the Public Service Loan Forgiveness Program. However, as the program’s first wave of eligible candidates stepped up to the plate in 2017, the vast majority were sent away without further explanation.

Temporary Expanded Public Service Loan Forgiveness Program

This brings us to today’s dilemma where the government has opened its doors on an expanded loan forgiveness program that has once again dismissed applicants en masse. Critics from around the industry have begun pointing fingers at Betsy DeVos with demands for answers. It has been easy to place blame on the Education Department because their recent mantra has seemingly been to increase the requirements of qualifying for loan forgiveness.

Interestingly, the requirements for the most recent wave of loan forgiveness include that an applicant must have already applied and been rejected for the original Public Service Loan Forgiveness Program. This caveat has flown well under the radar and is a suspected reason that tens of thousands of recent applicants were turned away this year.

The Failure of Student Loan Forgiveness Programs and the Education Department

The fact that so much misinformation is floating around on this subject is at the heart of why Donald Trump and the Education Department have found themselves under the eye of scrutiny. Many critics believe the Federal Government is employing black-hat tactics to withhold the majority of the $700 million budgeted for loan forgiveness. At this time, only $27 million has been put to use.

There is no doubt that misinformation and confusion – whether intentional or otherwise – has caused a great percentage of FedLoan’s overall application denials. Worse, after a candidate is declined, it becomes a lengthy appeal process to have the decision revisited. This throws off the timing for loan forgiveness, and it forces recipients to pay more on their loan than what they had planned for through up to ten years of timely payment.

Still, greater concern exists over whether the Education Department is building a coalition of lobbyists in the industry of third-party student debt consolidation. President Trump has ties with officials in the FedLoan agency. Having connections with the company responsible for handling the forgiveness plan gives President Trump a layer of security in the wake of growing concern over his Education Department’s competency. With Trump’s inside edge, it could be difficult for future democrats and other politicians to employ the sweeping forgiveness plans that have gained popularity among all groups of learners who currently owe on student loans.

Despite the obvious reasons for the popularity of sweeping forgiveness plans, the feasibility of such programs is something the Education Department discredits. With total student debt totaling over $1.5 trillion, the meager budget of $700 million would require a major overhaul. Funding and executing a sweeping forgiveness plan is a general mainstay in democratic campaign strategy for the 2020 election.

When thinking about all the pieces that went wrong with the loan forgiveness plan, its easy to place blame on the Education Department, the Federal Government at large and, of course, FedLoan Services. At the end of the day, however, misinformation and confusion are the leading causes of frustration for those graduates in need of financial help. It is impossible at this time to determine the extent that any of that confusion occurred to deny as many applications as possible. Many cases can be made about the President’s involvement with officials at the FedLoan organization, but no evidence has yet pushed the case beyond the point of speculation.

Bernie Sanders & Student Loans: Can America Afford a Debt Jubilee?

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Student loans are sources of stress for numerous American families. In fact, statistics show that student debts are worth nearly $1.5 trillion as of the end of 2018, and approximately three million individuals over the age of 60 are still carrying student debt. Thinking about student loan debt is difficult for young adults who are in the thick of college studies and who are only thinking about their futures and careers in the rosiest possible terms. However, once these students graduate and start making loan payments, they quickly realize what an impossible situation they are in particularly once they get married and begin seeing additional family costs.

Everything You Need to Know About Student Loan Debt Forgiveness and the Debt Jubilee

While student debt forgiveness once seemed to be an impossible idea, today, it is seeming much more possible thanks to the current economic climate in America and the ideas espoused by presidential candidate hopefuls. Soon, millions of Americans at all socioeconomic levels may be able to celebrate a welcome jubilee and relief from the overwhelming burden of long-lasting debt.

What Is a Jubilee?

The term jubilee goes back to Bible times when God told the Israelites to hold a jubilee every 50 years. According to the biblical book of Deuteronomy, the Israelites were to forgive numerous debts against their fellow countrymen in the fiftieth year and to return to their ancestral homes as parcels of land were given back to the original owners. While this jubilee ensured that the Israelites were able to retain some hope even if they were currently working as servants for others or had been forced to sell their ancestral lands to pay off debts, the jubilee did not refer to complete debt forgiveness as the term now means.

Could a Jubilee Be Coming?

While there is no law in the United States currently to proclaim a jubilee every certain number of years, there have been certain periods in U.S. history when incredible levels of debt relief were granted and people’s lives dramatically improved. One such example would be the time of the New Deal in the 1950s, which provided much-needed relief for families who had been burdened by the Great Depression and World War II. Could another jubilee be swiftly coming?

Four specific facts point to the strong possibility of sweeping debt forgiveness and a coming time of jubilee.

1. Debts of all types continue to rise in the United States. The government is in an incredible amount of debt, and consumer debts are sky-high as well.

2. Most Americans lack good financial health. Many are making the same wages that they were years ago, making it difficult for them to build savings or pay off debts. This is also leading to a stagnant economy.

3. Popular opinion especially among lower-income individuals in the U.S. shows that many are looking for huge changes in the American government.

4. The economy is in a weakened state, creating a strong possibility of a coming recession.

What About the Debt from Student Loans?

Intricately connected to this discussion of a possible debt jubilee is the current discussion of the Democratic presidential candidates. Numerous candidates have recently been proposing a variety of student loan forgiveness policies that they promise to adopt if they are elected. Here is a brief look at the candidates making these proposals and what their possible policies could include.

  • Bernie Sanders, who has probably been the most vehemently for debt forgiveness, has promised to cancel all student debt regardless of the income level of the individual. He has also promised to provide more Pell grants and other monetary offers to help lower-income individuals attend college.
  • Elizabeth Warren has promised to cancel a great deal of student debt, but her forgiveness policy would be based on the income level of the individual.
  • Julian Castro has also called for a partial forgiveness policy, stating that individuals with student debt should not have to make payments until they are making at least 250 percent above the federal poverty mark.

The candidates who support partial student debt forgiveness rather than full forgiveness do so because so many Americans with this debt are actually making very high incomes or have graduate degrees that set them up with the ability to make high incomes.

Can America Afford to Forgive Student Loans?

While all of this talk about student debt forgiveness can sound incredibly positive, Americans must keep in mind that promises from presidential candidates do not automatically equal positive results. Any person who has studied politics in the last several decades will know that most promises made on the campaign trail end up to be nothing more than smoke with no real substance to them. Therefore, can Americans start crossing their fingers and hoping for the best when it comes to student debt, or should they get rid of any hope they might still be holding onto for their bank accounts?

Although there are many positives in student debt forgiveness, there are also a few distinct problems with the proposed policies.

1. Nobody knows exactly how much student debt exists. While some estimate 2019 figures around the $1.6 trillion mark, the U.S. Department of Education does not actually disseminate full data.

2. Many colleges and universities also hold many student loans, which could add significantly more to the above figure.

3. Sanders proposes to fund this debt forgiveness with an additional tax on traded funds, which could cost the average American plenty over his lifetime.

4. Student debt forgiveness could make colleges and universities significantly raise their tuition rates, leading to even more debt in the coming years.

Because of the many unknowns, it is difficult for many Americans to form opinions on this subject, and it is hard for them to argue the position that they may already hold. Therefore, Americans may just have to wait and see what further information the presidential candidates give before making up their minds as to whether or not they support student debt forgiveness.

Private Student Loans Vs. Federal Student Loans

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We all like to imagine that we’ll be able to pay for college or send our kids to college without taking out any loans or going into debt. Unfortunately, though, for the average American, that’s just not possible, especially not with the ever-rising costs of college tuition. If you are a parent about to send a kid to school or a student heading back to school yourself, there’s a fairly good chance you’re going to have to take out a loan or two, and, as such, it’s important that you understand the different types of loans available. Understanding what your options are makes it easier to choose the right loan to meet your particular needs.

Private Student Loans

The distinction between private student loans and federal student loans is pretty clear. When asking what is a private student loan, the answer basically revolves around where the loan comes from. If it is a non-federal, i.e. non-governmental loan, then it is a private loan. These typically come from a bank, a school, a state agency, or a credit union but have no federal or government ties whatsoever.

Federal Student Loans

When asking what are federal student loans, the answer is even more clear. These are student loans that come from the government. Thus, if you want to know what is the difference between private and federal student loans, the answer boils down to whether or not the government has anything to do with the loan.

In the case of federal loans, which come from the government, there are harsher penalties for not paying or defaulting on the loan, including, in most states, potential garnishment of any wages earned. Typically, these loans also can not be discharged in a bankruptcy filing. While not paying back any loan can be serious and harmful to one’s credit score, not paying back federal loans is particularly damaging.

Paying Back Your Loans

Many other differences exist between federal and private student loans. One of the big ones is when, exactly, you are required to start paying back your loans. With most private loans, for example, you will be required to regularly make payments on the loan while you or your student is still in school. However, the payments are typically quite low and manageable and allow the student to graduate without facing a mountain of debt afterwards.

On the flip side, federal loans do not have to be paid back until you graduate. That means that you can get your education worry-free and just pay back the loans after you have received your degree. However, if you leave school or become less than a half-time student, as defined by your college or university, you will have to start paying back the loans you have received. Plus, upon graduation, you will typically have a large amount of debt to pay back.

Interest Rates

Another important distinction between federal student loans and private student loans is the interest rates involved. Typically, with federal student loans, you will enjoy a fixed interest rate, one that is, more often than not, somewhat lower than the interest rates on a private loan.

With that said, private loans do vary greatly in the amount of interest involved, and the interest may change if you fail to make payments as agreed upon. However, if you take care to find a reputable lender and make your payments as agreed upon, a private loan can be an excellent choice.

Of course, both options are viable and have their pros and cons, and many people require a combination of both in order to attend college or for their child to attend college. The point is simply to find the best option that works for you and your situation. As long as the end result is an education, it will be well worth it!

Fidelity To Launch New Program To Aid In Paying Off Student Debt

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Many employers are looking for new ways to entice and keep employees in their businesses. According to a recent survey, almost eighty-six percent of younger workers would choose jobs to commit at least five working years to if they were to receive help in paying off their student loans to do so. To create an increase in retention and recruitment of new, young workers, as well as helping to ease student debt burdens, Fidelity Investments has begun to offer employers the ability to join a new program to help their employees.

New Fidelity Student Loan Program

This new program can help a businesses’ employees pay off their graduate and undergraduate student loan debts easier and more quickly. With the help of the Student Debt Employer To Employee Contribution program, each employer will be able to make after-tax money contributions towards their participating employees’ loans using Fidelity for fulfilling and administering the payments in the end. The program is set to begin its pilot program during the last quarter of 2017 and be in full rollout in the beginning of 2018.

Any employer who wishes to participate in this program can turn to Fidelity with full trust as the strategic partner. They believe it is vital for their customers to have customized, modernized and creative programs in which to help the workforce become more financially stable today and into the future. This Student Debt Employer Contribution program has been designed to address the growing need across all of the generations who are struggling to get out of student loan debts. This is a one-stop experience for employers to help with their employees.

This new program will integrate along with Fidelity’s current platform to be used by both employers and employees. The employers will be able to easily manage the contributions they make towards their employees’ student debts using the Plan Sponsor Webstation on the dashboard of the program. Employees will be able to log into the dashboard and see and track those contributions that their employers have been making on their behalf. Also, along with tracking the employer’s contributions on NetBenefits, they will be able to keep track of their own benefits as well.

Fidelity To Offer Comprehensive Outline To Help Manage Student Loan Debts

Fidelity takes helping students with loan debt very seriously. Their commitment to helping goes beyond the Student Debt Employer Contribution program. They will also offer other tools which will help employees manage their current debts and help guide their parents to offering better support for making financial decisions about college and saving money.

•The Student Debt Tool will help people understand their current overall loan debt picture. It will offer the ability to get a personalized plan of action to help them lower their payments and pay the loan off much quicker. This tool can be used by anyone, whether they are a client of Fidelity or not. It gives borrowers a simple to understand picture of how certain programs such as the federal repayment plans or private refinancing options could help their situations.

•To help borrowers learn more about saving for college, Fidelity has created a College Savings program and a College Savings Calculator. Both can be customized and will help give borrower’s parents the ability to see how much their college kids should be saving. This can be used whether someone is already attending college or before they even apply.

The Burden Of Student Loan Debts

The burden of having student loan debts can be a tough on most people. According to Fidelity, more than a third of their retirement plan participants who were surveyed had student loan debts. Out of those, around eighty percent said the student loan debts have caused them to delay their retirement planning. Kevin Barry, the president of Fidelity Workplace, has said that employers will be able to use the market leadership of Fidelity to help borrowers relieve some of their financial burdens in order to make a positive impact on the ever-growing impact of student loan debts in the United States.

About Fidelity

The mission of Fidelity is to inspire a better future and offer better outcomes for their customers and the businesses in which they serve. They work hard to focus on meeting the needs of a diverse array of customers who look to them for financial assistance.

CFPB – Students Stopped From Accessing Loan Forgiveness Program

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For many years, graduating from college has been a significant part of the American dream. Parents proudly watch as their child crosses the stage to receive that all-important diploma. New graduates toss their caps into the air as they eagerly anticipate the beginning of an exciting and rewarding career.

However, that has not turned out to be the case for far too many graduates. Students, including those who wish a career in public service, are burdened with crushing student loan debts. These debts are particularly burdensome for those who wish to serve the public – approximately one in every four U.S. workers. The high debt payments can make public service jobs not affordable when compared to the higher salaries offered by corporate America.

Loan forgiveness programs were put in place to encourage graduates to pursue their public service careers. Recently, the Consumer Financial Protection Bureau (CFPB) reported that student loan services have been denying borrowers access to the Public Service Loan Forgiveness Program. This is only the latest of the scams targeted at people holding student loans.

Student Loans – An American Tradition

Harvard University actually began the American tradition of loaning money to students so they could pursue a higher education in 1840. However, student loans did not become widely available until 1944. Large numbers of veterans returning home from the WWII battlefields of Europe and Asia took advantage of the GI Bill to go to college for low or zero tuition costs. In subsequent years, about half of all college students were veterans.

In 1958, the federal government expanded student loans to all qualifying students as a means of encouraging more students to study science, mathematics, foreign languages and engineering. The Guaranteed Student Loan Program or FFELP (Federal Family Education Loan Program) was formed in 1965, allowing banks and others to provide students with government subsidized and guaranteed loans. It was quickly apparent that it would be necessary to monitor these large numbers of loans, resulting in the formation of The National Association of Financial Aid Administrators in 1966.

Student Loans Explode

Student loan programs evolved over time, adding Pell Grants for needy students and the Direct Lending Program for direct loans from the government to students. In 2010, the FFELP was eliminated. All new federal loans would now be made directly with students.

Private lenders did not want to be kept out of the huge student loan market and offered student loans directly to students with no government involvement. Students now had multiple loan sources. In 2012, the total amount of student loan debt had grown to more than $1 trillion, a staggering sum.

The Public Service Loan Forgiveness Program (PSLF)

The PSLP was established in 2007 to permit qualifying borrowers working in public service to have the remaining balance of their student loan debt forgiven after 10 years. This is a benefit offered to those who choose working in the public sector rather than pursuing higher-paid careers elsewhere.

Since many public service careers require advanced degrees, loan forgiveness after 10 years of public service removes some of the burden of the student loans needed in order to acquire the necessary education. A student can spend as much as $120,000 for a master’s degree at a top-rated university. In October, 2017, the first borrowers are expected to become eligible for loan forgiveness.

In order to qualify, borrowers must:

  • Make 120 qualifying monthly payments
  • Have a qualifying loan received under the Federal Direct Loan Program – other loans may become eligible if consolidated into a Direct Consolidation Loan
  • Work full-time for a qualifying employer (part-time jobs for qualifying employers may fulfill this requirement if a total of at least 30 hours per week are worked)
  • Complete and submit Employment Certification forms – this form should be submitted each year and whenever the borrower gets a new job

Student Loan Complaints Highlighted by the Consumer Financial Protection Bureau

Borrowers can become confused or be given incorrect information as to exactly what must be done in order to qualify for loan forgiveness. Many problems have arisen, eventually resulting in the June 2017 report by the Consumer Financial Protection Bureau (CFPB). Borrowers attempting to invoke their rights to loan forgiveness under federal law were delayed, deferred or denied.

Consumer complaints regarding student loans covered a wide range of problems against more than 320 companies including debt collectors, private lenders, student loan services and “debt relief” programs.

Some of the identified problem areas included:

  • Processing payments
  • Billing
  • Customer service
  • Communication problems between the borrower and the company
  • Issues related to enrolling in income-driven repayment plans
  • Co-signer issues

The Impact on Borrowers

As can be imagined, there were no lack of loan forgiveness problems impacting borrowers. A few of the reported difficulties are shown below.

  • When borrowers encountered financial difficulties and tried to apply for flexible repayment options that they had been previously told were available, the company said a flexible repayment option was unavailable or the borrower didn’t qualify.
  • Struggling and delinquent borrowers who were trying to avoid default were unable to find out what they needed to do to keep their loan from defaulting.
  • Borrowers received inaccurate or insufficient information regarding their eligibility for loan forgiveness. This can cause a borrower to make years of unnecessary loan payments, costing many thousands of dollars.
  • Incorrect information on loan consolidation could mean that none of a veteran’s military service would count.
  • Delays and errors in processing payments that caused payments to be “unqualified.”
  • Job certification problems that knock borrowers off the path to loan forgiveness.
  • Difficulties in correcting errors by services, such as misapplied payments.
  • Borrowers were unable to track their progress.

Certify Your Service

The CFPB announced the “Certify Your Service” campaign so those working in public service would be empowered to protect their progress toward forgiveness of their loan. Teachers and first responders will find guides specifically developed to address their issues. Guides cover available programs, picking the best program and getting on the path toward loan forgiveness. Employer tools are being updated.

Public service employees should:

  • Ensure they have federal Direct Loans.
  • Enroll in the correct repayment plan.
  • Certify their public service employment with an Employer Certification Form.
  • Keep complete records so they remain on track toward loan forgiveness.

Everyone benefits from the work done by all of those who have chosen to devote their lives to public service. Many public servants have made a substantial financial sacrifice in order to acquire the required education for their chosen career. The path to loan forgiveness should be as straightforward as possible. Hopefully, the new “Certify Your Service” program will be a step in the right direction.

Department of Education Requests Congress to Eliminate PSLF

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Department of Education Requests Congress to Eliminate PSLF by Summer of 2018

For students, graduating with a degree is the endgame. However, what comes after that might not always be in the graduate’s best interest. After taking out loans to help pay for college, graduates sometimes find it difficult to pay back those loans, which was what began the initial PSLF program. The new White House administration has begun to make some changes to this program, with plans to even do away with the program entirely. With these new statements, students might be wondering what this means for them in the future.

With so many people confused about what this will do for borrowers in the future, it is probably best to dive in further to truly understand what the elimination of the PSLF will do to education in general, borrowers, and current student graduates in the program right now. There isn’t much information about what is to come because no one knows. While the decisions are being made, there is much that students can do to prepare for such an event happening.

What is the PSLF?

The PSLF is just a quick way to say Public Service Loan Forgiveness, which is a program that was created to help provide loan forgiveness to students who were not able to pay back their loans promptly. According to Slate, students could have all of their debts erased by simply working for ten years for a nonprofit or government organization.

When this program was created, the idea was to encourage more students to go into public service jobs, but it hasn’t worked the way it was intended. Instead, it has been criticized without considering the impact that the program has on the government as well as the student borrowers in the program.

The program also has steep and ridiculous guidelines that make it difficult for many students to access the help. What good is it doing for most students anyway?

Before the change in office, a plan had been proposed to put a cap, or a forgiveness limit, on the program because many borrowers were using the program to earn forgiveness for hefty debts after obtaining expensive degrees from expensive colleges. The cap was never fully into place, which is what spawned the idea for the new Secretary of Education to completely do away with the program.

Many people are upset with the new Secretary saying that her actions are diabolical, but consideration for the cap that almost went into place by the former secretary would prove that the program would have only alleviated some of the student loan debt for borrowers. The program would have been all but gone anyways.

Department of Education’s Plan

Since the forgiveness program came into being, many people have looked negatively at the program, but some have begun to look negatively at the closing of the program as well. IN a way, it seems as though the Department of Education can’t win for losing in this situation. No matter which decision they make, they will not make everyone happy at the same time.

The fact of the matter is, the Department of Education will need to consider the economy when making the decision. Since the common people can’t make the decision for the Department, they should instead prepare as much as possible for what might come in the next year. The amount of preparation needed would certainly depend on how much was borrowed and how much money students are expected to make after graduation.

The plan is to completely get rid of the PSLF program. There will no longer be a way to work off the debt at nonprofit or government-owned businesses, and there will no chance for borrowers to easily pay off their debts. For some, this might seem a little harsh, but when looking at the bigger picture, it can be beneficial.

Times had changed considerably since 2007 when this program was initiated. Job creation is rising once again, and this might make paying back loans easier since finding a job is not as difficult as it has been in past years. Though the Department of Education’s plan might not seem like the best idea right now, in the long run, it might be the best decision for student borrowers.

Market Watch has compiled a short article speaking of only the negative aspects of this change to the program, but what they don’t mention is how much it will aid the economy in years to come. The students who have been in the program for a few years have expressed their concerns about the elimination of the program in the future, and they even make a few good points. However, they still never mentioned the impact this program has on the economy. The country, while trying to get out of debt, is simply wiping away debts of others, which is increasing the debt of the country as a whole. The money borrowed by students has to come from somewhere, and the money given by the government has to come from somewhere. With more money going out than coming back in because of this program, the economy has suffered.

What will this do for Students?

What will the ending of the PSLF program do for students? That question is quite hard to answer. For students in school right now, it can mean the opportunity to plan, which is what student loan and financial aid offices at the colleges are supposed to do.

Students can work toward a goal of paying off their loan faster by signing up for different activities that might look good on a resume. Since many students have been struggling to find a job, it can hinder their loan payments after graduation. However, by implementing student organizations to help plan for the future after graduation, students can leave better prepared than ever before.

For students who are already graduated, learning to balance loan payments and other expenses is something worth looking into. Financial counselors can help get graduates on the right track by setting up a payment plan based on their monthly pay.

For those who might already be enrolled in the program, the Department of Education has not exactly spoken of what will happen to those should the program be disbanded. However, it has been mentioned that these students would likely be grandfathered into the program until their debts have been paid, especially for those who have been in the program for quite some time now.

What can be expected by Next Summer?

Since the program has been expected to be gone by summer of 2018, there is a lot to expect by next summer. A new wave of graduates will exit colleges all over the country in the fall, spring, and summer of the 2017-2018 school year.

When next summer rolls around, many graduates will find themselves searching for a job, looking for a way to pay back their loans, and probably wondering why they did it all in the first place. However, when people stop to think about it, there will be other programs of this sort to help students in a sticky situation.

Financial planning, financial help, and more will be available for those who need the help after graduation. The PSLF will not be the only loan forgiveness program, for those who might be concerned about losing their chance for help.

For everyone else, it is only going to strengthen the economy to help make it easier on these students to pay back their loans. More jobs might be created, the national debt might lower, and overall the economy might drastically change. It is still too early to tell what to expect by next summer. The idea to disband the program might be overturned, giving some people the peace they needed. The program might be cut completely, giving others the peace they needed.

The Public Service Loan Forgiveness program has been around since 2007, helping students get their student loans forgiven just by working for nonprofit of government companies for ten years. While it started out as a great way to get students involved in public service, the program has been failing for quite some time.

Because student borrowers have been taking advantage of the program to eliminate all of their student debt, the Department of Education has made a motion to disband the program.

Many students are not excited about this change in the loan forgiveness program because it might prevent help to those who need it or even leave those in the program already stranded with a hefty loan still outstanding.

While it is hard to say what will happen in the coming months, it is possible that other loan forgiveness programs will spring up, free of government control. It is also possible that the economy will grow after the elimination of this program. However, there isn’t much that can be said to prepare students for the future. Instead, students should always be prepared to pay back their student loans six months after graduation.

Student Loan Interest Rates Rise for the First Time Since 2014

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A Snapshot of America’s Student Loan Debt

Student loans and student loan debt are a topic of frequent political and educational debate. Different organizations and political parties differ in their perception of the problem and how to resolve it. However, they do agree on one thing: more and more students are taking on student debt.

As of 2017, American students collectively owe more than $1.4 trillion dollars in student loan debt. The average amount of money loaned per student rose 6% from the graduating class of 2015 to 2016, with the average student owing just over $37,000. This amount is expected to rise again for the class of 2017. Nearly 66% of public university graduates took out student loans. 75% of graduates from private, not-for-profit universities took out student loans. At private, for-profit universities, 88% of students took out student loans.

Furthermore, 11.2% of student loan holders are delinquent, meaning that they are 90 or more days late on a payment. This means that more than one in 10 students who take on debt for their education are unable to repay their debt. This is an intimidating prospect for future students and graduates because federal interest rates are set to rise for the first time since 2014.

Student Loans Set to Rise

Starting July 1st, interest rates for federal loans will rise. Undergraduate Stafford loan rates will increase from 3.76% to 4.45%. The graduate Stafford loan will increase to 6% from 5.31%. Current students can borrow at their current rates and current loan rates will not change. However, all new federal loans taken out on or after July 1st will be subject to these new interest rates. These changes will affect students entering college for the first time or current students who need to borrow additional money.

Federal PLUS loan interest rates, which are available for parents of students, are also set to increase. On July 1st, PLUS loan interest rates will rise to 7%.

Federal loans may continue to arise each year as they are tied to the market rather than set specifically by Congress. This means that interest rates for students who need to make new loans may increase. However, Congress did set a loan interest rate ceiling at 8.25% for undergraduates and 9.5% for graduate students. Similarly, Federal PLUS loan interest rate caps are set at 10.5%. Again, it is important to note that rates for each loan are fixed. Loan interest rate increases only affect new loans.

Effects of the Increasing Federal Interest Rates

Increasing student loan interest rates will have several effects on borrowers and potential effects on the economy. Perhaps most obviously, students who follow the standard or graduated repayment plans will pay more to borrow the same amount of money. There is no penalty for repaying student loans early, so students who can afford additional loan payments or early an early loan payoff can negate some of the effects of the increased interest rates.

There is some speculation that increasing federal student loan interest rates will hurt taxpayers. There are several income-based repayment programs that enable students to make less than the standard minimum repayment. Some students use these programs temporarily if they are unable to find employment. Other students use these programs for 20 years and have the remainder of their loans forgiven. The amount per payment is income-based, meaning that the amount students would pay monthly would not be influenced by the increased interest rate. For students whose loan is forgiven, this means that a larger percentage of money owed and larger dollar amounts would be forgiven. This could result in a decrease in the federal government’s revenue from student loans.

How to Prepare

There are several ways that potential student loan borrowers can negate some of the effects of the increasing student loan interest rates. First, students can explore various scholarships and grants. By dedicating time now to finding and applying for scholarships and grants, students can decrease the amount of money they will need to borrow and therefore repay.

Second, students can apply for part-time work-study positions, on campus positions, and off-campus jobs. Pay isn’t always luxurious but money paid upfront for tuition, room and board, textbooks, and other related expenses is interest free.

Finally, students can make financially-conscious decisions about where to attend schools. Students should look seriously at the cost of tuition, scholarships and grants that they have been offered, whether those scholarships or grants will continue after their first year, and the cost of living in the school’s area. Students can also examine the median income for their expected career, loan forgiveness programs available to them, and their expected monthly student debt payments. Expensive is not always better and students may find themselves moving towards more affordable options as interest rates continue to rise.