The Student Loan Forgiveness Act of 2012 aims to solve the issue of student loan debt.
Congressman Hansen Clarke, D-Mich., proposed a bill in the House of Representatives on March 8 to provide relief to millions of Americans with student loan debt.
The national average for a graduate with student loans for the class of 2010 is $25,250.
Unpaid student loan debt is set to exceed $1trillion during 2012, and in 2010 it had surpassed total credit card debt.
What Clarke proposed was a 10/10 repayment plan, where graduates would only have to pay 10 percent of their income a year for 10 years, and after 120 consecutive payments, their debt would be forgiven.
“Anytime there’s a program to pay student loans with the ability to have a portion forgiven at end of a 10-year cycle, that does sounds like something definitely worth exploring,” said Mike Rotundo, director of financial aid. “If a student can keep on track meeting obligations and then have a portion forgiven, that can only help students in the long run; both in fact of keeping their credit rating so they’ll have ability to borrow future loans.”
The maximum for forgiveness is $45,520 for borrowers after the date of enactment, but there is no cap for borrowers before enactment.
Another part of the bill proposed setting a cap for interest rates at 3.4 percent, halving the 6.8 percent interest set for loans to be borrowed after July 1, 2012.
“Anytime a student is having difficulty, they should contact lenders,” Rotundo said. “Students can work with the Department of Education and lower obligation, which allow students to meet obligations and still have reduced obligation.”
Options currently available to borrowers facing financial difficulty are forbearance and deferment.
Forbearance is a temporary postponement or reduction of payments but interest still accrues.
Deferment allows borrowers to momentarily suspend loan payments for reasons such as unemployment, economic hardship or returning to school.
Under deferment, interest on subsidized loans does not accrue.
“NMU students mostly don’t default, but it could be a combination of contact [with the DoE] and setting up forbearance and deferment,” Rotundo said. “The first step is communication with the Department of Education and servicers. We don’t want to see students negatively affected by non-communication.”
Joshua Garnett, a junior public relations major, has previously heard of the bill proposed to the House. He especially likes the proposed 10/10 repayment plan.
“I think it’s great for people worried about repaying and what type of job they’ll get,” Garnett said. “It’s setting up for unhappiness if someone gets a job just to pay their loans, instead of a career they enjoy.”
He is most worried about finding a job six months after graduating and having to repay loans when he’s not able to afford them, Garnett said.
However, not everyone is in complete support of everything proposed in the bill.
“It’s not fair to the people with high-paying jobs,” said Maddie Moortel, senior political science and Spanish major. “They’ll end up paying more in the same amount of time.”
