With total student debt at $1 trillion and rising, the Student Loan Ranger is not surprised at the popularity of our post on the Student Loan Forgiveness Act of 2012.
We'd like to address some prevalent themes from comments we've received and, since the act has not yet passed, we also want to share information on currently available relief.
• Eligibility is a huge concern for some. The Student Loan Forgiveness Act's repayment and forgiveness plan only applies to federal student loans. The Student Loan Ranger repeatedly distinguishes between federal and private loans and provides information on relief for federal loans that is already available.
• Student loans can be confusing, with many different types and and servicers. Consolidation exemplifies this confusion. There are many options, but only one retains federal protections like income-driven repayment plans, deferments and forbearances, and forgiveness.
If you are consolidating federal student loans, consolidate into a Federal Consolidation Loan. These would be eligible for the Student Loan Forgiveness Act's 10/10 plan and improvements to Public Service Loan Forgiveness, and the interest rate cap would apply to new loans after the act is passed. They also are eligible for the existing protections mentioned above.
Keep in mind, however, that consolidating loans may reset any progress you've made toward relief like Public Service Loan Forgiveness. If you consolidate federal loans through a private service, they are not eligible for relief under the Student Loan Forgiveness Act, or for any currently available relief.
A common point of confusion: Just because you make payments to lenders like Sallie Mae doesn't mean you don't have a federal loan. Log into the National Student Loan Data System (NSLDS) to see if you currently have a federal loan; it's worth knowing if you can access some relief!
[Follow these seven steps to prepare for student loan repayment.]
• We've heard many frustrations about loans being transferred to different servicers. Different companies service Federal Direct Loans, and you may have federally-guaranteed loans from private institutions. Even though you pay servicers like ACS, your loan may be a federal loan. Check the NSLDS to find out.
• For parents with Parent PLUS loans: These would be eligible! This is great news because current relief is limited. They are not eligible for Income-Based Repayment (IBR), nor are consolidation loans that repaid them, but they are eligible for Public Service Loan Forgiveness (PSLF) if consolidated.
One form of relief that may help is Income-Contingent Repayment (ICR). While Parent PLUS loans aren't eligible for ICR, consolidation loans that repaid them are, so if you need relief, consider consolidating and enrolling in ICR.
• Many repayment stories span decades, leaving some discouraged and questioning the fairness of forgiving some debt and not others. The Student Loan Forgiveness Act would be retroactive! This means those who already meet the requirements (have paid at least 10 percent of income for at least 10 years) would be eligible for forgiveness as soon as it passes.
• To prevent abuse, the act caps the amount that could be forgiven for new borrowers. Current protections for federal loans are available no matter how long you've been repaying, so if you need relief now, plans like IBR and ICR may help.
• The act doesn't have a provision for borrowers unable to work, but cancellation in instances of total and permanent disability is currently available for federal loans. The process of applying can be prolonged and complicated but can help tremendously. Find out more from the Department of Education and learn about your rights.
• Many suggested limited relief, such as limiting forgiveness to only those who attend community college followed by a state institution. This presumably would encourage students to choose public institutions and prevent forgiving "excessive" borrowing. This is a valid concern, but given concerns about access to community colleges and that public institutions continue to raise tuition in the face of reduced state funding, the Student Loan Ranger thinks more relief is needed. We'd like to see more creative ideas to address rising costs.
We'll leave you with one eloquent opinion expressed in response to our Student Loan Forgiveness Act post: "I think people are getting too caught up on the term 'forgiveness.' A more accurate term to describe this proposal would be fairness." Fairness is what student debt relief really is about.
Radhika Singh Miller is a program manager for Educational Debt Relief and Outreach at Equal Justice Works. She has served on student loan committees in the Department of Education's negotiated rulemaking focusing on the College Cost Reduction and Access Act (CCRAA) and other debt relief initiatives. Radhika graduated from Loyola Law School Los Angeles. Prior to joining Equal Justice Works, she was a staff attorney at the Partnership for Civil Justice, focusing on constitutional and civil rights litigation and advocacy.