What are the details of HR 4170?
Loan forgiveness and refinancing program for students
The Student Loan Forgiveness Act, introduced by Michigan Democrat Hansen Clarke, is designed to stimulate the economy by providing for forgiveness of loans and refinancing of private and public student loan debt. Many borrowers have a high amount of student loan debt and may find it difficult, if not impossible, to repay the cost of student debt following their graduation from college. In fact, some people are still repaying debt 20 years after their graduation date. The new act has provisions for a 10% of income repayment cap, lower interest rates, and ways to forgive student loan costs with public service and over time. Following the reelection victory for President Obama, there is more momentum for a student loan forgiveness or refinancing act, given the trillion dollar student loan timebomb that is dragging down the upward mobility of people who carry loans.
On an almost daily basis, news sources are reporting stories about parents who owe hundreds of thousands of dollars for their childrens' loans, or mothers who are obligated to pay for loans of kids who may have died young. Unfortunately, negotiations regarding the "fiscal cliff" and the fact that the House of Representatives is in Republican hands may limit the ability to forgive student loans, though it is very possible that a modest refinancing package could go through which would allow for more repayment monies to go toward principal. Another approach would be to find ways to reduce the costs involved in University education, since tuition costs have risen faster than inflation for as long as anyone can remember. As long as Federal loans keep up with tuition costs, school administrators have an incentive to raise prices.
Many loan forgiveness programs are already active or on the drawing board for 2014, including forbearance and debt cancellation for teachers, nursing students, and government employees. Federal programs and Americorps allow for the reduction or elimination of Stafford loan or other debt programs, though many private plans currently are untouched and still require the traditional repayment. Under some circumstances, disability is a factor in choosing to cancel such a debt.
Notes and Special Information
Special note: This act has not become law, and it may take several attempts for a student loan forgiveness bill to make it to the President's desk.