(C) Daily Kos
This story was originally published by Daily Kos and is unaltered.
. . . . . . . . . .



New DoE plan to prevent spiraling student loan interest! [1]

['This Content Is Not Subject To Review Daily Kos Staff Prior To Publication.', 'Backgroundurl Avatar_Large', 'Nickname', 'Joined', 'Created_At', 'Story Count', 'N_Stories', 'Comment Count', 'N_Comments', 'Popular Tags']

Date: 2022-07-11

From: https://www.businessinsider.com/bidens-plan-to-prevent-spiraling-interest-on-student-loan-debt-2022-7

There’s been a lot of argument on the subject of student loans and forgiveness. I don’t want to get into that debate here, because if true (and more importantly retroactive), this is just plain good news for almost everyone who holds student loans, something I hope everyone can agree with.

Currently, interest capitalization happens every year, no matter what repayment plan a borrower is under. It also happens after a deferment or forbearance (as interest continues to accrue under those) and if a default happens. This has always been problematic for most borrowers, such as anyone who is under one of the income-based plans, which limit monthly payments to what they can actually pay. This rarely covers the interest that accrues, which then gets capitalized, which then starts to snowball pretty quickly.

I currently owe more on my student loans than I did when I graduated more than a decade ago because of interest capitalization. And I’m lucky compared to many borrowers because my loans are under a low-interest plan (I also qualify for public service loan forgiveness). Many are effectively re-enacting the Sisyphus legend due to how much their loans have grown due to being unable to even keep up with the interest.

Basically, while there will be times when the DoE is required by statute to capitalize interest, it will refrain from doing so unless it is required to. So this announcement is a very good thing. It will, at the very least, help ensure that future borrowers are not trapped by snowballing interest in the future, and if they make it retroactive to all borrowers, it will make it far more likely that they will actually be able to pay off their loans, rather than watching their balance snowball on them due to inability to pay.

I wish they had done this back in 2021, but at least they’re doing it now. Thanks for reading.

[END]
---
[1] Url: https://www.dailykos.com/stories/2022/7/11/2109728/-New-DoE-plan-to-prevent-spiraling-student-loan-interest

Published and (C) by Daily Kos
Content appears here under this condition or license: Site content may be used for any purpose without permission unless otherwise specified.

via Magical.Fish Gopher News Feeds:
gopher://magical.fish/1/feeds/news/dailykos/

You are viewing proxied material from magical.fish. The copyright of proxied material belongs to its original authors. Any comments or complaints in relation to proxied material should be directed to the original authors of the content concerned. Please see the disclaimer for more details.