It’s been another big year for student loans. As the $1.2 trillion in outstanding education debt continues to grow, the Class of 2014 became the most indebted ever, with recent college grads owing $33,000 on average and the number for graduate/professional degree borrowers often closer to the six-figure range.
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When President Obama delivered new rules on income based repayment (IBR) for a limited group of borrowers back in 2013, we wrote about the shortcomings of that program. This week, the President extended the new IBR program to cover all borrowers, effective in 2015. It’s the same program as before, and while it can provide payment relief to some borrowers, it has some serious drawbacks. Notably:
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There is a lot of debate going on these days about overhauling student loans. Here’s a high-level summary of our view:
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Earlier this year, the Consumer Financial Protection Bureau (CFPB) solicited input on how to “stop the student debt domino effect.” Tens of thousands of individuals and organizations responded with their comments and suggestions along with our very own CEO Mike Cagney.
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Much has been written about the new income based repayment (IBR) rules the President recently signed into law. Notably, maximum payments on qualifying federal loans are now capped at 10% of disposable income rather than 15% before, and after 20-years, any remaining balances are forgiven, versus 25-years before.
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