Hi Everyone!
We will be completing out second socratic seminar this week!
Public Speaking: Socratic Seminar 2
Loan Forgiveness Rationale
Obama loan forgiveness is a plan that has been introduced due to the increasing problems about students’ loan debts in United States. This plan is intended to help students who are not able to fully pay their loan and those who have settled a significant amount of their loan balance for numerous years. This plan clears all outstanding debts of students who have made timely and regular payments on their current federal loans for more than 20 years. Also, individuals who work in government departments like the military service might have their entire amount overdue cleared earlier before the minimum year based this plan.
Justification for this plan
Low Payments
This plan takes into consideration the size and income of the family when calculating the loan settled by borrowers. Those who are qualified for this program may have their monthly loan payments restricted at around 10% of their income. For example, people who earns $50,000 per annum and have a current loan balance of $40,000 at 6.8% APR are generally needed to pay a minimum of $460 every month on the standard repayment scheme. Therefore, contrary to other settlement plans for student loan, borrowers may gain from low payments.
Requirement
It’s significant to note that not every borrower may quality for this program. This plan is only eligible to people who currently have federal loans like Perkins or Stafford loan. Only those who people who had borrowed a loan on or later than October 1, 2007, or new borrowers with a current federal direct loan may qualify. In addition, you should have acquired your direct loan later than October 1, 2011. Therefore, it’s important to know the actual date when you acquired your loan so as to establish your eligibility. Moreover, people with default student loans are not eligible for this program. Therefore, you need to seek advice from your credit servicer for the perfect solution about this issue. However, it’s important to know that it may take long to clear your loan due to the lower monthly payments. The accrued interest involved in this program is very high compared to the standard repayment scheme. Nevertheless, those who have current private loan may use a student loan forgiveness provided by employers and private institutions. Moreover, there are a few employers in private institutions and companies that may agree to pay off the entire amount or outstanding debt if you meet the terms and conditions.
Conclusion
Obama Loan Forgiveness Program is designed to offer borrowers who have financial difficulties a reasonable loan repayment alternative. But there are certain requirements which borrowers must before they may qualify for the plan. Therefore, it’s important for students to take into account all potential payment schemes which may be appropriate to their situation so as to find out the most applicable option that work best for them.
---http://studentloanservicesgroup.org/obama-loan-forgiveness-the-facts/
Here Comes The Student Loan Forgiveness (Slightly adapted form original article)
Some politicians are now in the process of expanding a student loan forgiveness program. They wish to add more students to the eligibility list for a program created in November 2013.
The federal government already subsidizes college through direct federal funding to schools, Pell Grants to students, and below-market interest rates on student loans. This loan forgiveness program increases the federal subsidy of college education to a whole new level.
Under the latest version the program, people with student loans that meet certain income eligibility standards will only need to pay 10 percent of their discretionary income for a maximum of 20 years. Discretionary income is the amount you earn above the poverty line for your family size. If a borrower works for a government or in a job defined as public service, they only have to pay for 10 years. After that, the remaining balance is forgiven.
In an extreme case, a person could pile up $100,000 in student loans going to an expensive school, graduate, and go to work for a non-profit advocacy group with 501(c)(3) status in New York City. Imagine that our graduate stays single and is paid $40,000. She will pay only about $187 per month which will not even cover the interest accruing on her loans.
If she stays employed in public service for ten years, her loan balance will be forgiven at a point when she actually owes more than the original $100,000 balance because the payments were so low that the loan had negative amortization. In fact, over ten years, our imaginary student will have paid only slightly more than $22,000 to a government that gave her $100,000 to help pay for college.
This enormous expansion seems unnecessary and incredibly unfair. First, with all the studies showing that college degrees pay for themselves in higher lifetime earnings, why should taxpayers—many of whom have not gone to college—have to subsidize people who are likely to have above average earnings? Second, why is the federal government providing larger subsidies to people pursuing careers that are in less demand in the marketplace?
And why are low pay, government, and public service jobs doubly rewarded? To an extent, society judges the worth a different jobs by the earnings of those performing them. That does not mean that low-paying jobs do not have worth, but if we needed more people doing those jobs, the price (earnings) would rise. Nurses are in short supply so a nurse can earn over $100,000 per year in any major city. Certified welders can earn $75,000 per year or more because employers cannot find enough of them.
Today most government jobs pay more than private sector jobs, so why would borrowers working for the government be given more favorable terms?
The idea behind the “Pay-As-You-Earn” program appears to be that the government can judge who is deserving of a bigger college education subsidy. Do we really believe that the government is better than the market at determining which careers benefit society? After all, somebody advocating controversial positions than many taxpayers disagree with could be eligible to have over $100,000 in loans forgiven while somebody performing medical research to cure cancer might not because they are earning too much money.
Unless somebody can make a good argument why taxpayers should not only subsidize college students but subsidize more heavily those whose educations are not yielding an economic payback, this program makes no sense.
The student loan program may make sense as a mechanism to increase opportunities to go to college, but only to the extent that students can later pay back what they have borrowed. Otherwise, the government is simply encouraging students to become burdened with excess debt and to ruin their credit scores. Why are student loans the only loans made without any regard for ability to repay the borrowed funds?
Rather than inventing new ways to forgive student loan debt, perhaps the government could think of ways to not lend money that students will be unable to repay. After all, that is how every other type of loan works.
