Student-Debt Forgiveness Plans Skyrocket, Raising Fears Over Costs, Higher Tuition – WSJ.com

• Student-Debt Forgiveness Plans Skyrocket, Raising Fears Over Costs, Higher Tuition – WSJ.com

  Costing the government billions to forgive student loan debt and new limits in place to curb student loan borrowing. Forgive student loans for graduates making long-term commitments in teaching, and other hard to fill positions in urban and rural communities. 

  tags: education learning forgiveness tuition costs debts loans graduates

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  • Government officials are trying to rein in increasingly popular federal programs that forgive some student debt, amid rising concerns over the plans’ costs and the possibility they could encourage colleges to push tuition even higher.
  • At issue are two federal loan repayment plans created by Congress, originally to help students with big debt loads and to promote work in lower-paying jobs outside the private sector.
  • Under the plan, the unpaid balances for those working in the public sector or for nonprofits are then forgiven after 10 years.
  • An independent study estimates the future cost of the 2011 program, known as Pay As You Earn, could hit $14 billion a year.
  • The Obama administration has proposed in its latest budget released last month to cap debt eligible for forgiveness at $57,500 per student. There is currently no limit on such debt.
  • but over the risk that promising huge debt forgiveness could make borrowers and schools less disciplined about costs. Colleges might charge more than they would otherwise, leading students to borrow more.
  • Federal data show tuition and fees are up more than 6% a year on average in the past decade, more than 2 1/2 times inflation.
  • The main aim, administration officials say, is to curb eligibility for forgiveness while allowing more borrowers to repay loans based on their income.
  • Max Norris,                              a 29-year-old lawyer for the state of California, illustrates the potential costs of the program. He pays about $420 a month to the Education Department on his $172,000 in debt,
  • In all, 432 Georgetown graduates are now in the program, up from 264 in 2012. Annual tuition is $50,890.
  • report last week from the Brookings Institution, a centrist think tank, offered one of the few preliminary examinations of the programs’ impact. The most popular plan could cost taxpayers $14 billion a year if it becomes available to all borrowers as Mr. Obama has proposed, while fueling tuition inflation, it said.
  • “Loan forgiveness creates incentives for students to borrow too much to attend college, potentially contributing to rising college prices for everyone,” the study said. The authors recommend scrapping the forgiveness provisions.
  • The popularity of the programs surged after the Obama administration began to promote them, starting in 2012, on the Internet and later through email to borrowers.

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