Solving The Forbearance Problem : How Students Can Be Relieved On The Problems Associated With Forbearances

Solving The Forbearance Problem : How Students Can Be Relieved On The Problems Associated With Forbearances

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SOLVING THE FORBEARANCE PROBLEM
There are bigger scale solutions on how students can be relieved on the problems associated with forbearances, but it would be much more feasible to talk about more specific solutions. To start off, there are two possible solutions to the problem and those are forgiveness programs and the availability of bankruptcy options for borrowers. First of all, forgiveness programs in the form of the IBR plan have already been established by the Obama administration in 2012. IBR allows borrowers to pay from 1-15 percent of their adjusted gross income. Also, they only have to pay from 10 to 25 years and all their loans and all remaining balances after the set period are forgiven (Mitchell). In fact, borrowers who have Direct Federal Loans can avail of this option online. The details of the program are all relative, but it is definitely much better than forbearances. This is definitely a step up from private companies who uses forbearances as a way to “charge as much as they possibly could,” knowing that people are in fear of losing their federal disability or disaster relief payments will be seized if they go on default (Default). According to the Wall Street Journal, the average amount that will be forgiven racks up to $41,000 per borrower. This is very important because it will alleviate distress from borrowers and make it easier for them to live their lives without the fear of debts overshadowing their financial options.
Next, the second solution is to place student loans in the same standards as other loans by being availed of bankruptcy options as well. The student loan industry does not have any federal standards and they have a lot of discretions in their lending standards and practices. According to a...


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...ffect that can improve the practices of private loan companies as well. Finally, borrowers should be educated in the pitfalls of forbearances so they will be more aware of the operations of the entire industry. For most people, student loans are their first shot to establishing their credit scores and their first experience in financial services. Having a bad experience with student loans potentially impacts millions of lives for the rest of their lives. As President Barack Obama said during his speech at the 2010 State of the Union Address, “ no one should go broke because they chose to go to college” (Default). Hopefully, borrowers will be more aware of these problems and f. Further improvements on the income-based repayment plan will ensure that 13 percent of the Americans will be less distressed regarding the 1.2 trillion burden that was set upon their shoulders.

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