As the year draws to a close here’s a little recap of some the progress that’s been made in 2012 regarding help with student loans.
1. Obama is Re-elected
In his first term in office President Obama made several improvements to the Income-Based Repayment plan that serve to provide borrowers with lower monthly repayments and also make it easier to qualify for loan forgiveness down the road. President Obama also marginally increased the maximum allowable amount of the federal Pell Grant. In addition, the Obama administration supports increased regulation of for profit colleges, a step students badly need in the fight to combat student loan abuses. Mitt Romney had promised to cut President Obama’s reforms and is not in favor of for profit school regulation.
Going hand in hand with the results of this year’s presidential elections is the next step in Obama’s student loan plan: Pay-As-You-Earn. The finishing touches on the program were announced last month and it is planned to go into effect in 2013. PAYE will cap the percentage of borrowers’ discretionary income defined under federal student loan repayment plans at 10% in lieu of the current 15%, which will lower the monthly payments of millions of borrowers. PAYE will also make loan forgiveness under Income-Based Repayment available after 20 years instead of the current 25 years.
3. CFPB Pushes For Bankruptcy Protection
The results of inquiries by the Consumer Financial Protection Bureau’s Student Loan Ombudsmen have led the agency to recommend to Congress that bankruptcy protections become more available to borrowers of private student loans. Currently private student loan law irrationally gives dangerously little flexibility to borrowers and it is next to impossible to gain protection from bankruptcy laws, causing serious damage to borrowers.
4. The Peoples’ Bailout
Occupy Wall Street has come up with a fantastic new way to fight student loans, they call it the Rolling Jubilee and it’s a people’s bailout. The group is raising money to buy consumer debt from banks. Usually when this happens, it’s a company buying up your debt for a fraction of what’s owed. These companies then come to collect from you instead of the bank. When the Rolling Jubilee buys up your debt, they simply tear it up.
5. Innovative Ways To Deal With The Student Debt Crisis
The two best things about adversity are that it inspires us to get creative in our methods and that it tends to bring people together. Many are coming up with alternative methods to deal with overwhelming school debt. Some have developed their own debt repayment plan, while others have found new communities in which to develop their own version of college entirely. Some have even found geographic help with student loans while others have come together to create organizations that help students manage debt.