Managing Student Debt: A New Government Program
by Efin Advisor | June 17, 2009
For many people, debt begins at the age of 18, when they begin their college education. Sad to say, many student borrowers don’t recover from this debt for many years, even decades. Debt has the habit of snowballing: it piles up and before you know it, interest rates have caused it to grow to huge proportions.
So how can students begin to cut off debt before it gets the better of them? There are a plethora of programs out there to help manage student loan debt, but that debt still exists, it’s just a matter of when it gets repaid. A new program is designed to decrease payments and cut off debt.
Starting on July 1st, Income Based Repayment (IBR) goes into effect. This program typically covers people who have more debt than they have income in a given year. The IBR program caps payments based on how much you earn. While this may make it seem like the debt will just be with you longer, in fact, the debt is forgiven after 25 years. If you work as a teacher, work for the government, or work for another non-profit, the debt may be forgiven in as soon as 10 years. This can represent a huge improvement for a young adult’s debt management. For example, if you are a family of 3 making only $26,000 a year, then your payments are $0 and your debt is presumably forgiven.
The program may induce more people up to go into public sector work. Those who want to be social workers, teachers, or even non-profit lawyers, can find relief from the huge expenses of college and erase the fear of accumulating too much debt. Debt forgiveness programs can ease the anxierty of students, and their parents, about entering into certain fields.
For more information, visit IBRInfo.org
What other debt relief programs should the government create? Should the government be helping in debt relief at all? As always, your comments are appreciate
I’ve always thought that there should be more programs like what we have for the military. If you agree to join the military for i believe 3 years, then the government will pay for your post-graduate education (like if you want to go to law school, the government will pay for law school if you go work in the JAG core for 3 years). I don’t know all the specificis of the program and if it applies to undergraduates as well, but there should probably be a similar program for teachers. If we got rid of student debt for people willing to go be teachers in cities for 3 years, then we would have a lot more teachers and a lot mroe people getting quality educations. What do other people think about this?
Reply
I’m not sure if this program is a significant, or even slight, departure from previous debt relief programs. I thought there were already plenty of debt relief programs for people who go into public interest, and for the most part, people who have significant student debt and incomes lower than that tend to be working in the public sector anyway, so how is this different?
Reply
Roman Reply:
June 18th, 2009 at 6:14 pm
This is significant in that it extends benefits to people who typically have had to work significant amounts of time in the public sector to people who are just of low income levels. It may not be a huge benefit, but the fact that they are advertising it more (there is a nice youtube video about it) makes it so they are at least getting the word out there, which is always a major problem with some good governmental programs
Reply
This is really important considering this terrible market we are in now. I think we are going to find a lot more college graduates who just aren’t making very much money if any at all. People are going to have to settle for whatever job they can get, and with all the debt they have, they are going to be in bad financial situations. This could not come at a better time since now students are graduating. I know my son is having a hard time finding a job as a recent graduate, i doubt he is unique
Reply
When we are in a huge budget deficit, I really don’t think its the time for the government to literally give away money. Seriously, we need to get money before we start giving it away. People aren’t goign to learn to be responsible with their debt if they expect the government to just bail them out, though people seem to ignore this principle in every sector of the economy nowadays.
Reply
Katherine Reply:
June 18th, 2009 at 6:10 pm
The same argument can be used for getting rid of welfare, unemployment and pretty much every other federal program there is. Its actually most important to spend money right now, because otherwise we aren’t going to get out of this financial crisis. We need to inject money into the market, and one of the best way of doing that is to ease debt for people so they are more able to spend money again. Its basic Keynesian economics
Reply