After years of studying hard, a New Jersey graduate student finally finishes school. She then immediately feels the pressure to find a job.
Although employment prospects are better than they were a few years ago, finding a job with decent pay proves harder than she thought it would be. Adding pressure is that the student has to begin paying back her hefty student loans in just six months.
A few months into her job search, the student begins to wonder if graduate school was such a good idea after all. She then remembers reading that student loans are not usually forgivable in bankruptcy proceedings and she begins to panic.
If you can relate to this graduate’s situation, you are not alone. In fact, thousands of recent grads in New Jersey are struggling to make their student loan payments right now.
That’s why a group of organizations, including the National Association of Student Financial Aid Administrators and Young Invincibles, has announced a proposal for revamping student loan repayment programs.
The proposal makes it easier for graduates (and non-graduates) to set up income-based repayment plans so that they are better equipped to pay back their loans. Similar plan alternatives currently exist, but the proposal seeks to streamline and simplify them.
Essentially, the groups have proposed treating student loan payments a lot like Social Security in that they would be deducted from a borrower’s paychecks based on a percentage of her income. In the proposal, the new plan is dubbed “auto-IBR,” or automatic income-based repayment.
After income-based payments were made for a certain length of time, usually 25 years, the remainder of the student loans would be forgiven.
The groups have proposed that this should be the default plan for paying back student loans instead of the current 10-year standard repayment plan, which can result in extremely high monthly payments with the soaring cost of higher education. Other plan details exist as well.
For more information on getting relief from student loan debt, talk to an experienced bankruptcy lawyer in your area.
Source: The Bloomberg, “A Proposal to Radically Simplify Student Loan Payments,” Karen Weise, Mar. 24, 2014