First in a two-part series on student debt. Stay tuned to the end of this video for a special appearance by yours truly.
Watch Student Loans: More Debt, More Defaults, More Problems on PBS. See more from PBS NewsHour.
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I wish the reporters would clarify the difference between federal and private loans.
Again, this is my understanding. Please correct me if I am wrong.
Backed up against a corner, do NOT default on the FEDERAL loans. Negotiate a payment plan. The feds can attach your pay without a court order or prior notice, so go to their web site and work out a payment.
Ignore the private loans until they take you to court, at which point payments are based on 10% or 15% of disposable income.
Regarding the 10% or 15%, I assume that it would be for the total private debts (all individual loans rolled up). The disposable income is based on how far above the poverty line you are and figures in existing federal school loan payments.
The real lifeline, of course, is http://www.govtrack.us/congress/bills/112/hr4170. Just forgive the debt and provide a way to allow people to receive the education that is essential for the future of this country. God Bless America.
My understanding is as follows. Please correct me if I am incorrect.
The federal debt can be consolidated and paid based on income, with balance forgiven in 25 years. There are actually several payback options. This is one of them.
The private loans are the ones that you can't escape from because of the 2005 BAPCPA. There are bills in both houses to eliminate the language that prevents clearing private school debt in bankruptcy. In the house (http://www.govtrack.us/congress/bills/112/hr2028) and in the senate (http://www.govtrack.us/congress/bills/112/s1102).
The ability to clear the private loans in bankruptcy along with the ability to make income based payments for a fixed number of years provides a reasonable way to pay off student debt.