How to fix student loan debt? Student loan debt is one huge crisis in the US and many other parts of the world, no doubt. Many people want to be educated, but it now seems that there is a price to be paid in order for the dreams of many to be achieved. And that price is relatively high.
How to Fix Student Loan Debt
The slight possibility of federal student loan forgiveness seems to be getting all of the headlines. But experts in the field say that no single policy and not even wiping the slate clean for millions of borrowers all over the US and the world at large will solve the root cause of the $1.7 trillion student loan debt crisis of the nation (US).
The debt in question has now been fueled by decades-long of wages not keeping up with the rising cost of college, no lie. And unless there is a significant change in wage increase and college cost decrease, students will still need to take on debt in order to complete their degrees, and they will get to face greater difficulty in repaying back their loans.
Forgive Student Loan Debt
Broad forgiveness could help the most vulnerable of borrowers which consist of those who never graduated and lack the bigger paychecks that typically and usually come with a degree to pay off the debt that they acquired along the way.
Experts however diverge on whether there should be broad forgiveness, and the plan of President Biden to forgive up to $20,000 in student debt per borrower still remains frozen amid legal challenges. But if it however does get to happen, they agree future debt accumulation must be addressed.
Streamline Existing Forgiveness Programs
There is too much red tape affecting existing forgiveness programs, experts reportedly say. Salerno, an expert on the matter calls it a “bureaucracy and paperwork crisis.”
These programs in question have had low rates of acceptance historically, but a limited waiver that was available through October 2022 broadened the number of payments that qualified for many more borrowers. The reported fix was not permanent, though.
Democrats in Congress have however suggested making all federal student loans as well as repayment plans eligible for PSLF, thus waiving restrictions for forgiveness and then qualifying borrowers automatically.
Cut or Even Lower Interest Rates
Federal student loan borrowers have not had to make any form of payments since March 13, 2020, and they will not again until the summer of 2023 at the latest, under the guidance of the current government. And during this reported pause, zero interest is accruing. That simply means that loans will not grow and, if you can even afford to make payments, you can pay off your debt much quicker.
Making zero interest permanent or even lowering interest on the existing debt could help borrowers in the long run in paying off their debt without growing the principal, says expert Betsy Mayotte, the president and founder of The Institute of Student Loan Advisors.
Many borrowers Mayotte hears from say that their biggest gripe is growing interest.
Fixes To Income-Driven Repayment Forgiveness
Many borrowers are expected to now benefit from one-time fixes that count past payments toward the 240 or 300 that is needed for income-driven repayment forgiveness, the Department of Education back in April 2022 announced. The fixes in question are also expected to cancel debt for at least 40,000 borrowers all through Public Service Loan Forgiveness.
Make College Tuition Free
Tuition-free college at the associate’s degree level, just as Biden has proposed, could benefit low-income students, particularly those who otherwise would not get to attend college, and could even reduce overall borrowing. Advocates of College affordability are calling for tuition-free four-year programs as well.
Experts, however, agree that tuition-free programs will still require borrowers to take on debt in a bid to cover living expenses whether it is on or off campus.
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