American students and graduates are heavily indebted to the government and financial institutions for debt incurred via investment in education. According to Consumer Reports, the total amount of this debt exceeds $1 trillion an amount approximate to 7 percent of the nations annual gross domestic product. Federal Reserve Bank data indicates this $1 trillion in national student loan debt accounts for 40.7 percent of total consumer debt which includes revolving credit, real estate mortgages, and car loans.
President responds, but not enough
A petition to the Whitehouse has been signed by over 32,000 debtors demanding action to a real problem. This is just one of several large scale efforts to shed light on the issue. President Obama addressed this nationwide problem of unsustainable student loan debt and interest. A recent executive order allows student loan repayment terms for new graduates to go in effect in 2012, and eases income contingent payment plans to 10% of discretionary income. It also shortens terms of forgiveness to 20 years of repayment. The San Francisco Chronicle outlines additional details of these changes, however what these changes do not allow are relief to students already in repayment according to Mark Kantrowitz of the New York Times. Moreover, graduates in repayment are subject to a generational law that serves to facilitate student loan repayment under far different economic conditions, from a different time.
Federal law endorses double standard
A double standard also exists between how the government loans and private debt are handled. Essentially, government loans claim sovereign immunity from debt that would otherwise be able to be restructured or forgiven under Chapter 11 and Chapter 13 bankruptcy law. The purpose of these latter laws are to help individuals and families bogged down in unrealistically high debt rebuild their lives and contribute to a health economy with manageable bills rather than sink in to a sea of eternal repayment of interest that subjugates individual and small business development via financial dysfunction. Additionally, if a graduate in repayment loses a job or enters forbearance for medical reasons, the 25 year conditional repayment forgiveness resets. In other words, these loans can't ever be forgiven is borrowers don't have a perfect life that doesn't cause interruptions in their loan repayment schedule; it's unrealistic.
Lender terms and practices are oppressive
Lower interest rates via consolidation do help, but lenders such as Nelnet, Inc. that claim to comply with federal regulations are not required to do anything more. For example, Nelnet, Inc. claims no correspondence is legally required to warn a secondary owner of a consolidation loan that reapplication for income contingency plan is about to expire. If the primary loan owner does not inform the secondary owner, then any bonus interest savings acquired from years of on-time repayment are automatically disqualified upon late payment. These small changes can vastly affect a student's ability to repay their loan both functionally and realistically with little consequence to lenders.
President responds, but not enough
A petition to the Whitehouse has been signed by over 32,000 debtors demanding action to a real problem. This is just one of several large scale efforts to shed light on the issue. President Obama addressed this nationwide problem of unsustainable student loan debt and interest. A recent executive order allows student loan repayment terms for new graduates to go in effect in 2012, and eases income contingent payment plans to 10% of discretionary income. It also shortens terms of forgiveness to 20 years of repayment. The San Francisco Chronicle outlines additional details of these changes, however what these changes do not allow are relief to students already in repayment according to Mark Kantrowitz of the New York Times. Moreover, graduates in repayment are subject to a generational law that serves to facilitate student loan repayment under far different economic conditions, from a different time.
Federal law endorses double standard
A double standard also exists between how the government loans and private debt are handled. Essentially, government loans claim sovereign immunity from debt that would otherwise be able to be restructured or forgiven under Chapter 11 and Chapter 13 bankruptcy law. The purpose of these latter laws are to help individuals and families bogged down in unrealistically high debt rebuild their lives and contribute to a health economy with manageable bills rather than sink in to a sea of eternal repayment of interest that subjugates individual and small business development via financial dysfunction. Additionally, if a graduate in repayment loses a job or enters forbearance for medical reasons, the 25 year conditional repayment forgiveness resets. In other words, these loans can't ever be forgiven is borrowers don't have a perfect life that doesn't cause interruptions in their loan repayment schedule; it's unrealistic.
Lender terms and practices are oppressive
Lower interest rates via consolidation do help, but lenders such as Nelnet, Inc. that claim to comply with federal regulations are not required to do anything more. For example, Nelnet, Inc. claims no correspondence is legally required to warn a secondary owner of a consolidation loan that reapplication for income contingency plan is about to expire. If the primary loan owner does not inform the secondary owner, then any bonus interest savings acquired from years of on-time repayment are automatically disqualified upon late payment. These small changes can vastly affect a student's ability to repay their loan both functionally and realistically with little consequence to lenders.
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