Educational loan : Reforms Could Combat Rising Student Loan Defaults

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Educational loan
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Reforms Could Combat Rising Student Loan Defaults
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• The most recent student loan default rates
  released by the Department of Education show that
  sadly, but not surprisingly, default rates rose
  for the sixth year in a row.
• Each default is not an abstraction, but a person
  experiencing personal distress and real financial
  hardship.
• Much of this is needless, because small tweaks to
  already existing programs could go a long way
  toward eliminating it, in the Student Loan.

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• The cohort default rates measure the percentage
  of a school's borrowers who default on their
  loans over a specified period of time.
• The two-year rates measure the percentage of
  borrowers who enter repayment on their federal
  student loans during a particular federal fiscal
  year and default prior to the end of the next
  fiscal year.
• The more accurate three-year rates which
  Congress mandated as part of the Higher Education
  Opportunity Act of 2008 calculate the
  percentage of defaults prior to the end of the
  second fiscal year after borrowers enter
  repayment.

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• Starting next year, only the three-year rates
  will be calculated. But in the meantime, the
  Department of Education is releasing both sets of
  rates.
• Both indicate that borrower distress is still
  rising, with the two-year rate rising from 9.1
  percent in fiscal year 2010 to 10 percent in 2011
  and the three-year rate rising from 13.4 percent
  in fiscal year 2009 to 14.7 percent in 2010.
• The department's rates also put numbers on the
  human toll. The three-year default rates indicate
  that 600,545 borrowers who entered repayment in
  2010 defaulted before the end of 2012.
• That's more than half a million borrowers who are
  facing some of the consequences of defaulting on
  federal student loans, including seizure of tax
  refunds, garnishment of wages and the partial
  taking without a court order of Social
  Security payments.

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• The Student Loan argues it is imperative that
  Congress take affirmative steps to end this
  needless misery.
• It should begin, as President Barack Obama has
  requested, by allowing all borrowers to enroll in
  Pay As You Earn, the new income-driven repayment
  plan that caps payments at 10 percent of a
  borrower's income and provides for forgiveness
  after 20 years.
• Congress should then require all federal student
  loan servicers to personally contact borrowers
  who are delinquent, in a hardship deferment or in
  forbearance and offer to enroll them in Pay As
  You Earn.
• This should help greatly reduce the number of
  defaults.

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• However, there are other means of ensuring
  accountability.
• The Educational Loan feels the president's plan
  to tie college financial aid to performance
  should be pursued with vigor.
• And the Department of Education's revised gainful
  employment rules, under which career-oriented
  programs would lose the ability to receive
  federal student aid if graduates' debt-to-income
  and debt-to-discretionary-income ratios are too
  high, should be extended to all institutions of
  higher education.
• These could increase accountability for
  institutions while providing much needed
  protections for millions of suffering borrowers.
• Source http//bit.ly/YH6LcY

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