Article: Stude-Loan Collection Targeted for Overhaul in Congress

[Lesley]

http://www.bloomberg.com/news/print...ection-targeted-for-overhaul-in-congress.html

"Congress will consider overhauling debt collection in the $100 billion-a-year U.S. student loan program, replacing it with automatic withdrawals from borrowers' paychecks tied to their income...."

Very interesting.

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[DrMidlife]

Thanks for the link.

Noted: first attempt to end PSLF. Why? To pay for a proposed cap on total interest.

For those not paying close attention, congress doesn't pass a lot of laws.

 

[annonymous819]

http://www.bloomberg.com/news/print...ection-targeted-for-overhaul-in-congress.html

"Congress will consider overhauling debt collection in the $100 billion-a-year U.S. student loan program, replacing it with automatic withdrawals from borrowers' paychecks tied to their income...."

Very interesting.

So now I have to involve my employer in my personal debt management? And HR departments are forced to run an additional accounting equation that increases the cost of employing someone?

Sounds stupid, I bet it passes.

 

[dpmd]

So now I have to involve my employer in my personal debt management? And HR departments are forced to run an additional accounting equation that increases the cost of employing someone?

Sounds stupid, I bet it passes.

It talks about this being an alternative to sending people to a collection agency, so this only affects those people who haven't made an effort to pay or forbear their loans.

 

[Lesley]

Second paragraph: "This would require employers to withhold payments from wages in the same way they do taxes." In addition, this bill potentially insures that students pay all that they borrow but caps interest at an additional 50%, but no mention of any caps on penalties, if any, and eliminates IBR and public service forgiveness programs. Pretty serious stuff.

 

[Postictal Raiden]

Second paragraph: "This would require employers to withhold payments from wages in the same way they do taxes." In addition, this bill potentially insures that students pay all that they borrow but caps interest at an additional 50% of what they borrow but no mention of any caps on penalities, and eliminates IBR and public service forgiveness programs. Pretty serious stuff.

Correct me if I'm wrong, but paying off the entire debt + 50% interest over 25 years isn't a bad deal at all. For someone who graduates with 300K, paying 150K on 25 years is barely enough to set off inflation.

 

[Lesley]

Not bad at all, but for some it could potentially take longer than 20 - 25 years depending on their income. For those who borrow and hope with public service forgiveness programs or IBR they would only have to make a payment of 10 - 15% of their income for only 10 - 25 years regardless of how much principle or interest was repaid, this could be a major reset should it pass.

Consider a Fed tax of 28 - 33% + a state tax 4-6% + a school loan repayment (tax) 15%: 50% +/- tax on earned income for as many years as it takes to pay off all borrowed principle plus 50% interest.

Borrowing responsibly is always wise.

 

[annonymous819]

Consider a Fed tax of 28 - 35% + a state tax 4-6% + a school loan repayment (tax) 15%: 50% +/- tax on earned income for as many years as it takes to pay off all borrowed principle plus 50% interest.

Borrowing responsibly is always wise.

I have a feeling that the principal+50% interest deal would be phased out for high income individuals, making this 50% +/- tax on earned income stretch out a few extra years.

In another boon to borrowers, the plan would cap interest owed at 50 percent of a loan’s face value at the time of graduation, giving a break to lower-income borrowers who take longer than the standard 10 years to repay loans.

 

[Lesley]

It is possible. We will have to see how this progresses.

 

[Igor4sugry]

"The new system would apply only to new loans."

 

[Lesley]

I wonder what this means exactly, should this bill pass. Will this apply only to new loans dispersed after this bill passes or any loans that go into repayment following passage of this bill?