February 23, 2014

There Will Be NO Student Loan Bailout

No.  Its not going to happen.   Stop expecting it.   Whatever you do .... DON'T make financial plans around it.   There is not going to be a student loan bailout.   I thought this story had died out months ago but just recently I saw someone still talking about the prospect for a bailout of student loan debts. 

The government isn't going to just write off over $1.2 Trillion in debts because some people would benefit.  There are many people who do struggle to repay student loans, this is true.   But most people are certainly willing and financially able to pay their loans back.     In either case we can't expect free money to come from the government any time soon.   Honestly a student loan bailout is just a misguided pipe dream.

The bigger reason that there isn't going to be a bailout is that we've already had bailouts.    For people struggling with their student loan debts there are already government programs to help them and get at least partial forgiveness of the debts.

There is the new Pay As You Earn Repayment Plan  which has 20 year forgiveness.   Which is added to the existing Income-Based Repayment Plan (IBR) which includes 25 year forgiveness plan.   And if you go into public service then there is the  Public Service Loan Forgiveness  which has 10 year loan forgiveness.    These programs aren't simple blanket loan forgiveness for the entire nation as some people delusionally expect but they are certainly a very big helping hand for those who really need it.

I know that student loans are a burden to many people who have high debt levels and lower paying jobs.  But thats what the income based and pay as you earn repayment plans are setup to help with.   Now unfortunately those plans do not work with private lenders and many of the people in the worst situations are burdened with high private loan debts.  I don't expect any major changes or aid for people with large private loan debts.    Personally I think it would be a good step if they would force private lenders to all offer a income based system at least.  As it is you can't get rid of student loans in bankruptcy so you're stuck with the private loans for life, and I don't see what harm income based system would do there.


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