Because nearly one-in-six student loan borrowers are in default, the federal government is planning a debt relief solution. Sounds good, right? The problem is, a new study shows the income-based plan, designed to help borrowers with high debt and low income keep up with payments, will really only benefit the upper-middle class, especially those with graduate degrees.
Graduate degrees? I keep hearing that the solution to the student debt crisis is not to keep getting more degrees. I’ve heard it many times: “if I don’t get a job, I’ll go to graduate school.” To get further in debt? It doesn’t seem like a real solution. It might defer payments, but it builds upon the loan. Now, students will be encouraged to pursue graduate degrees as a way of writing off loan payments.
The Obama administration is changing the current program to make it easier for some borrowers, by expediting changes that will reduce monthly payments from 15 percent of discretionary income to 10 percent and forgive outstanding balances after 20 years of payments, instead of 25 years.