Last Updated Mar 19, 2010 1:37 PM EDT
The student loan debt provisions, which are wrapped up in the landmark healthcare legislature, would finally end obscene taxpayer subsidies to private student loan companies. For years, student lenders have pocketed billions in subsidies to extend federal loans to students even though the federal government assumed virtually all the default risk.
Ending this craven practice will free up $61 billion over the next 10 years. A small portion of this money will used to strengthen an excellent federal student loan repayment program that aims to make it easier for borrowers to manage their student loan debt.
In some cases, participants can currently slash hundreds of dollars from their monthly student loan tab. For instance, a single American, who qualifies for the program, will pay no more than $47 a month if his or her income is $20,000. For a single worker making $30,000, the top monthly obligation would be $172. For a family of three, that monthly check would shrink to $32.
The student loan repayment plan is geared towards former students, whose salaries aren't high enough to cover their monthly living expenses and their student loan debt.
Under the current student loan repayment plan, former students must devote 15% of their discretionary income to pay down their student debt. Any remaining student loan balance is wiped out in 25 years. But as I mentioned, this student loan repayment program is about to get better. The new legislation would require that borrowers only pay the equivalent of 10% of their discretionary income each month. In addition, all the federal loan debt would be wiped clean after 20 years.
Unfortunately, not enough student borrowers know about the existing student loan repayment plan. With any luck, passage of the legislation will bring much deserved attention to it.
Lynn O'Shaughnessy is the author of The College Solution and she also writes for TheCollegeSolutionBlog. Follow her on Twitter.
Student loan image by Dyanna. CC 2.0.