I’m HATIN’: Because The Student Loan Forgiveness Act is NOT What We Think It Is

Like most American’s, I have utilized bank, Federal Subsidized and Unsubsidized loans to pay for my college education. And, I too, like many Americans, am still paying… 

Recently, there has been much talk about The Student Loan Forgiveness Act of 2012, House Bill H.R. 4170, and as of Wednesday, April 25, 2012, a day known as "1-T Day" - the estimated date on which student loan debt will officially hit a mind-boggling ONE TRILLION DOLLARS, everyone is searching for an answer to this crisis.

Hate to break it to you folks, but H.R. 4170 is not the “God-send” you’ve been waiting for.

High interest rates, 10-year forgiveness plans and the fact that colleges and universities aren’t being held responsible for their part in the crisis, leave me undeniably and certifiably HATIN.’

Edjuma-HATIN’

Let me first dive into The Student Loan Forgiveness Act of 2012 and what most civilians think it stands for.

Pegged as a “legislation designed to lend a helping hand to those struggling under massive amounts of student loan debt,” the bill, proposed by Robert Applebaum and submitted into the House of Representatives by Rep. Hansen Clarke, aims to do the following: 

• Create a new “10-10 standard” for student loan forgiveness, in that if you make payments equal to 10% of your discretionary income for 10 years, your remaining federal student loan debt would be forgiven. If you have already been making payments on your student loans, your repayment period would likely be shorter than 10 years. The amount you have already paid on your student loans over the past decade would be credited toward meeting the requirement for forgiveness.  
• Cap federal student loan interest rates at 3.4%.
• Consolidate private loans by converting them into federal Direct Loans, then enrolling the new federal loan into the 10/10 program.
• Reward graduates for entering public service professions like teaching and firefighting and provide incentives for medical professionals to work in underserved communities. 
• Jumpstart the economy by creating jobs and increasing American purchasing power 
• Create jobs by increasing consumer demand for goods and services.    
• Incentivize students to be mindful of educational costs and for colleges and universities to control tuition increases. 

If you ask me, it’s all smoke and mirrors.

Here are my major issues with the proposed bill, as it stands:

Familiar Schedule – The repayment schedule looks almost identical to what we have been paying. A majority of loan holders signed promissory notes that span a 10-year timeframe. Am I wrong?

1. The 10/10 Rule – 10% of your discretionary income is completely subjective, and if I’m not working, like the 4.1% of college graduates in the US aren’t (Source: Bureau of Labor Statistics - http://www.bls.gov/news.release/empsit.t04.htm), than 10% of $0 is ZERO. Stop calling my house for payments. A recent Rutgers University study found that, in a simply random sample of recent graduates from four-year universities, only 53 percent held full-time jobs. And, with jobs scarce, many graduates are forced into service jobs that don’t fit the expensive qualifications they’ve just spent four or more years acquiring. What’s more, the fine print of the bill reads that an individual, under the new plan, would have to successfully complete 120, on-time, up-to-date payments, over the 10 year period, for the remaining balance to be expunged. 120 perfect payments? Good Luck.
2. Cap On Loan Forgiveness – The cap of $45,520 is a bit unreasonable when you look at how much money one can spend on a college education. Let’s say, for example, I pay $40,000 per year to attend my college/university of choice. At the end of my four years, I owe $160,000. So, I now take my shiny diploma and begin working (if I’m lucky) and pay a whopping $900 per month for my loan (which is more than some people pay in rent/mortgage), some going to principal and some going to interest. After 10 years, I’ve “only” paid $108,000; Meaning that I still owe $52,000+ that CAN’T be forgiven. BULL-ISH
3. Eligibility Requirements – My guess, many of us, who have been paying off student loans for years, are not eligible for much in this new program. Especially those who are near completion. Again, it is subjective, and on a case-by-case basis, held between the borrower and a secretary of the Federal government.
4. 3.4% Interest Still Seems High – If this bill REALLY wanted to held students, it would do an introductory rate of 0% for the first three years and increase, incrementally, up to 3.4% through the life of the loan. This would provide an incentive for borrowers to pay back faster, and, for those out of work and under hardship, would allow them to pay down the principal first.
5. Colleges and Universities Aren’t Made to Help Rectify the Crisis they Created 
   College education is a profitable business. It is documented that since 1980, the average tuition for a 4-year college education has increased by 827%. Since 1999, average student loan debt has increased by 511%. That is RIDICULOUS! As long as colleges and universities are able to jack up the price of education to whatever they want, no amount of debt/loan forgiveness will help. This bill needs to begin with the schools, both private and state funded. There should be something in this bill that provides incentive for colleges lowering/capping costs, i.e. schools charging more than $40,000 in tuition are not eligible for Federal grant money. Let’s hit them where it hurts; their wallets.

Attribution: Christopher Weyant, The Hill

But, don’t just take my word for it, educate yourself and read the entire bill, both the legal document and the simplified version, and make your own judgments.

For a brief summary of H.R. 4170′s main provisions, go here: http://tinyurl.com/7akydbk

To read the full version of the actual bill itself, please go here: http://tinyurl.com/6txure8

To read answers to some of the most frequently asked questions about the Student Loan Forgiveness Act of 2012, please go here: http://tinyurl.com/8xh4csd

Ultimately, the bill does address the fact that there is a crisis among working Americans, but I think… no, I know, we can do better than this.

Broke and HATIN’