New Law Might Ease Student Debt
Published: Monday, March 19, 2012
Updated: Sunday, August 12, 2012 23:08
Students struggling under heavy student loan debt may be able to apply for loan forgiveness within 10 years of graduation, thanks to a new piece of legislation drafted by Rep. Hansen Clarke (D-Mich., LAW ’87).
The Student Loan Forgiveness Act of 2012, which was proposed March 8, would create a 10/10 loan repayment plan; graduates could have their loans forgiven in 10 years if they pay 10 percent of their discretionary income each year. Graduates already repaying loans would likely be able to have their loans forgiven in less than that time.
The law would also create incentives for graduates to enter public service professions such as teaching and firefighting, and medical professionals would be rewarded for working in underserved communities. In these cases, debt would be forgiven in five years instead of the usual 10.
Scott Fleming, associate vice president for federal relations, lauded the proposed legislation.
“Anything to reduce students’ debt obligations is very desirable,” he said.
Countrywide, student loan debt currently exceeds credit card debt and is expected to reach $1 trillion by the end of 2012.
If the bill passes, Fleming said the proposed bill would have a relatively small effect on Georgetown students because of the generosity of the university’s financial aid packages. Georgetown students also have a strong track record in paying off debts, with a default rate of about 0.8 percent in 2009, the most recent year for which data is available.
“Our financial aid office has a policy of trying to hold student loan debt to about $17,000 by packaging in grant aid and work study,” Fleming said. “Georgetown has a very low student loan default rate … which means our students end up doing well and are able to pay off their loans.”
However, according to Fleming, the act would be helpful to students facing heavy debt loads and seeking jobs in lower salary industries, such as those in public service.
“Incentives that do result in loans being forgiven are obviously helpful to our students who graduate with student loan debt,” Fleming said. “We have a lot of students who do want to do public service work. For those, loan forgiveness is a particularly important option.”
However, Fleming emphasized that the most important objective of the act is creating a long-term plan to keep student loan interest rates low. Interest rates on student loans are currently at 3.4 percent, but when the College Cost Reduction and Access Act expires July 1, rates are set to rise to 6.8 percent.
“Congress tends to deal with things at the 11th hour. When it comes to this provision the 11th hour is fast upon us,” Fleming said.
Fleming also warned of potential difficulties with such legislation.
“There is a cost associated with keeping the interest rate down,” he said. “That would also have to be tackled.”
Fleming added that Clarke’s proposal reflects his commitment to helping those in need.
“Last Friday, Clarke joined a group of Georgetown students who did an Alternative Spring Break in Detroit working with them at a soup kitchen,” he said. “It is clear that Clarke is serious about doing everything he can about helping needy people in our society, and I think that is reflected in his legislative proposal.”