Boston Student Loan Lawyer

The New America Foundation, a nonprofit think tank, has published a new report proposing a complete revamping of student financial aid and student loan repayment. Given the extent of the student loan crisis in America (student debt has outpaced credit card debt two years ago, over two-thirds of borrowers are having trouble making their payments, and economists have likened the growing student loan debt crisis to the subprime mortgage crisis that triggered the Great Recession), something clearly must be done.

Some of the proposals include:

• Increasing Pell Grant funding to minimize student loan debt burdens for low-income students.
• Simplifying federal student loan repayment by having a single income-sensitive repayment plan similar toIncome Based Repayment (IBR) or Pay As You Earn (PAYE).
• Completely eliminate higher-interest and higher-burden federal student loans such as Grad PLUS loans and Parent PLUS loans (which have led to an exploding parent loan debt crisis).
• Eliminate education and financial aid-related tax credits and instead provide additional direct financial aid to students.
• Tie the availability of financial aid to a school’s performance in providing an education and career path for its students, thereby increasing accountability and return on investment.
• Restore bankruptcy rights to private student loans.

Not to toot my own horn here, but these proposals mirror some of my own proposed student loan reforms that I posted about last year. Clearly, something needs to be done, and we need MAJOR reform. Do you agree with the proposals put forth in this new report? Read the report and decide for yourself.

Last week the U.S. Department of Education released some new regulations governing various federal student loan issues. Here’s a handy overview of the details:

• The “new and improved” IBR program, as I’ve been calling it, will be called the “Pay As You Earn” program. This new repayment plan option for “new borrowers” will allow for monthly payments of 10% of discretionary income (as opposed to 15%) and a 20-year repayment term (as opposed to 25 years), with forgiveness of the remaining balance thereafter. As I’ve written about previously, this is a great repayment plan option, but it won’t be available to most borrowers who have already graduated and are in repayment now. The regulations confirm that the Dept. of Education will exclude most of these borrowers from the “Pay As You Earn” program.
• The regulations also attempt to streamline the process for applying for a discharge of federal student loans on the basis of Total and Permanent Disability. Specifically, the regulations allow for some Social Security Disability determinations to support discharge applications, and the regulations make it easier for a representative to assist the borrower in the discharge process.
• Finally, the new regulations try to address some of the ongoing problems with federal loan servicing by offering simpler IBR recertification forms.

Ultimately, these new regulations are a mixed bag. They certainly include some positive changes for federal student loan borrowers, but they do little to aggressively address systematic problems with the federal loan borrowing and servicing system. To read all the details on the new regulations, click here.