Are you dreaming of college acceptance letters? Are you also having nightmares about how you will pay for college and the amount of debt you will accumulate over four years?
It’s no wonder. Student loan default rates are as high as 9%, and college graduates are entering a very tough job market.
But, there may be some help on the way. The government has some plans that could make things better for student borrowers.
Interest Rate Reduction – With both direct loans and bank-based loans, if you consolidate those loans into the direct loan program, you can get a 1/2 % rate reduction. Now there is no bank-based loan relief or consolidation program. Consolidation is a good plan because students will not have to pay several institutions. Also with bank-based loans often the loan is “sold” to another lending institution which adds to confusion. One payment with a bit of a reduction can only help.
Loan payment cap to be moved up – Some student loans are paid back based on the borrower’s income. That percentage was to be capped at 10%, down from 15%, by 2014. The plan is now to move that date up to 2012.
Simpler Financial Aid Disclosure Forms – The form colleges use to notify students of their financial aid offer is to be simplified. The new form should make it easier for parents and students to compare offers from different colleges and to distinguish the kind of monies being offered. Students and their parents need to know what is being offered as scholarship aid or in grants, both of which do not have to be repaid, and loans of various sorts that do have to be repaid.
New Department – The Consumer Financial Protection Bureau is setting up a new department. The Student Debt Repayment Assistant will help students look at loan repayment options and help them navigate their after-college debt.
Every little bit helps. The fact that the government is now paying attention to student loan debt and how it impacts their lives for years is a welcomed development.