Paint It Black
Pending student-loan legislation could ease you out of the red.
WORDS BY Pablo Mayo Cerqueiro // ART BY MEI WANG
President Barack Obama didn’t finish paying off his student loans until he was 43. Unfortunately, many college grads find themselves in the same boat as the commander in chief. In 2012, seven in 10 college seniors left school dragging an average of $29,400, according to the Institute for College Access and Success.
After facing these dire facts you may be asking yourself:What do I do? The good news is elections are coming up, and you’ve got a chance to make a change.
In 2012, seven in 10 college seniors left school dragging an average of $29,400
First you need to familiarize yourself with the Higher Education Act of 1965, which regulates federal student loans. In July of 2013, this act was updated to establish a market-based system for determining interest rates, according to the National Association of Student Financial Aid Administrators. Interest rates for federal direct loans are expected to rise by 1.23 percent between July 2014 and June 2015 — so think twice before you head back to school and borrow more bucks.
Of all the pending legislation aimed at easing student debt, two measures may have the greatest effect on your fiscal future.
The Federal Student Loan Refinancing Act by Democratic Sen. Kirsten Gillibrand could help you tackle your long-standing debt. If you received a loan on or after July 1, 2006, and your interest rate is above 4 percent, this measure would allow you to pay back at a fixed rate of 4 percent. For those done with school, Gillibrand’s proposed legislation would be especially beneficial because of its retroactive nature.
The Student Loan Fairness Act by Democratic Rep. Karen Bass would also help borrowers get out of the hole. The pending legislation would create a 10-year plan for borrowers to repay at 10 percent of their discretionary income. After 10 years, the remaining debt would be forgiven. It is effective for borrowers who completed 120 monthly payments at least as large as the 10/10 plan starting a decade before the act is implemented.
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