On July 1, 2009, the provision of the College Cost Reduction and Access Act of 2007 went into effect. But is it enough? Hundreds and thousands of borrowers anticipated some hope of relief only to feel short-changed.
The College Cost Reduction and Access Act of 2007 supports the ever-pressing “Go Back to School” campaign. With this provision, more grants are available for lower-income families, lower interest rates for subsidized Stafford loans, and lower monthly payments. Furthermore, it offers loan forgiveness after ten years, or 120 payments after October 1, 2007 if you are not in default. Student loan defaults are at their highest rate since 1998, and likely will go higher.
Let’s not forget that many of us are facing loans prior to 2007. What relief do we have?
I graduated in 1999. After the initial deferments while searching for a higher paying job, I would say that I have been paying on this loan for over 7 years with barely denting the initial loan amount owed. According to this provision, only those payments made after October 1, 2007 will be included in the 120 payment loan forgiveness. Meaning, I have over 80 payments before being considered for this relief, despite the economic hardship we are currently in.
Though federal student loans offer some payment modification options such as economic hardship, filing for bankruptcy on a student loan is not one of them. In fact, without this option, many post-graduates are saddled with debt and unable to buy a home or obtain other credit. (I would have loved to have taken advantage of the first time home-buyers incentive, but with both me and my husband paying off student loans and have a car payment, I am maxed out my lending capacity).
There are many Americans in my same situation, with one or two parents paying off student loans while creeping up to start paying for their children’s college education. How can we possibly encourage our children to continue their education when we cannot even afford our own?
We also cannot ignore the fact that of those “moms” that have “gone back to school” as encouraged, they are landing jobs and careers that may pay well, but require no education at all. Not only mothers, but many post-graduates in certain fields are finding the degree makes no significant increase in the income potential. I find it more likely to encourage my children to work hard and network than I do to continue their education.
The promise that education equals careers and higher pay is not exactly true. With unemployment rates ranging from 5-12% (depending on the state) it seems unjust to penalize through poor credit scores and maximizing credit limits for something that is more related to a “natural distaster” than laziness. Our request for assistance in these student loans is not from the unwillingness to pay off our debt, but our inability to obtain a position that can afford us to do so.