It's Weird Law Friday and today we're going to discuss a law that affects millions of Americans who have student loans. According to the law, even though most consumer debt can be dissolved through the bankruptcy process, federal student loan debt cannot. Indeed, those who are burdened by student loan debt must struggle to pay back their student loans for the rest of their lives if necessary. Nevertheless, this could be changing with several executive measures brought forward by the current presidential administration.
$1.2 Trillion in Outstanding Student Loans
The student loan debt problem has skyrocketed during the last decade. In 2003, the total amount of student loan debt in the United States was a paltry $250 million in comparison to the $1.2 trillion that it has increased to in 2014. Indeed, in these difficult economic times, more college students have been required to take out federal loans and grants to finance their eduction and the total student loan debt figure has grown as a result. Unfortunately, many graduates have not been able to find jobs after college that pay enough money for them to make their loan payments.
Pay as You Earn Program Could Help Ease Student Debt Burden
The solution the president has offered to this problem is called "Pay as You Earn". The initiative says that an income-based cap will be placed on how much ex-students are required to pay on their loans. According to the initiative, students will not have to pay over 10 percent of their monthly earnings on student loan payments. The measure could potentially benefit 5 million ex-students who are currently trying to pay their loans back.
Considering the fact that student borrowers cannot seek bankruptcy protection from these federal loans, the measure could be helpful to those burdened by other types of debt. Limiting student debt payments to 10 percent of one's income, combined with various bankruptcy solutions to resolve other types of debt, could be a winning combination to assist consumers who feel trapped inside a debt situation, looking for a way out.
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