$100 billion burden: Obama’s “Pay as you Earn” sparks debate

Ways to reduce or eliminate your student loans

October 26th, 2011 by Nicholas Whittaker | Permalink

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Momentum for the federal government to eliminate all student loan debt is growing. Congressman, Hansen Clarke (D-MI), who is gaining support for “H. Res 365” bill which “would provide student loan debt forgiveness as a means of economic stimulus,” according to the New England Post.

Screenshot via the Department of Education

“If we cut student loan debt that’s going to create more jobs and that will provide more financial security.” According to Clarke, college debt is “the true debt that is burdening American families. If we cut student loan debt, we’ll have a freer, more prosperous country.”
Opponents however think it is the “worst idea ever”.  “I bet that the proponents can’t find a single economist to support this idiotic idea,” says econoblogger Justin Wolfers.  He feels that those who have graduated college typically have “high incomes”, however more grads than ever are settling for low paying jobs, many while others with student loan debt never finished college.
“I agree the bailout should start with the common folk here instead of the big guys! I have been in deferment for 4 years, I have to decide between a house payment or a student loan. What would you choose?” said one disenchanted college grad.
According to StudentLoans.gov, there are circumstances where you can discharge or cancel your student loan debt.

• Your school closed before you could complete your program.
• For FFELSM and Direct Stafford Loans only: Your school owes your lender a refund, forged your signature on a promissory note, or certified your loan even though you didn’t have the ability to benefit from the coursework.
• You work in certain designated public school service professions (including teaching in a low-income school).
• You file for bankruptcy. (This cancellation is rare and occurs only if a bankruptcy court rules that repayment would cause undue hardship.)
• You die or become totally and permanently disabled.

Alternatively, certain charity work can qualify you for full or partial loan forgiveness. According to FinAid.org, you must:

• Perform volunteer work;
• Perform military service;
• Teach or practice medicine in certain types of communities; or,
• Meet other criteria specified by the forgiveness program.

Volunteer organizations such as AmeriCorps or Peace Corps offer 15% for each year of service, up to 70% in total.  The Volunteers in Service to America (VISTA) program is dedicated to eradicateing hunger, homelessness, poverty and illiteracy. Under this program, if you provide 1700 hours of service, you will receive $4725 towards outstanding student loans.