Memphis students continue to graduate with more and more loan debt. Because student loans normally cannot be discharged in bankruptcy and must be repaid, sometimes students may find that they have few options for long-term debt relief.
Recently, a representative from Wisconsin has devised a new plan to help students repay their loans. His plan suggests that rather than students paying a fixed amount every month, the student would only pay 15 percent of their income every month, including a cost of living allowance. This allows students to only pay what they can afford based on their salary. The loan payment would be deducted automatically from the student’s paycheck.
The plan also proposes a cap on the amount of interest that a loan can accrue. The loan interest would not compound while the student is repaying the loan. Further, the interest amount could not exceed 50 percent of the loan balance at graduation.
These proposals aim to make it easier for students to pay their loans back. Students who are unable to find a job upon graduation or face financial difficulty would be expected to pay only what they could, which would reduce the number of student loan defaults. It is important to remember that, even if a former student defaults for a legitimate reason, student loans can ordinarily not be discharged in bankruptcy.
Since these changes have not yet passed in to law, it is important for students taking out loans to be aware of all their options. Students should seek financial counseling and financial planning to come up with debt management solutions. Students should be mindful of their loan balance at graduation and plan accordingly to be able to pay off their loans.
This new solution would help students to be able to pay back their loans. As the change has not yet occurred, students must still consider all their debt management options before taking out loans.
Source: FDL reporter, “Petri pushes student loan legislation,”Dec. 20, 2012