From the Desk of Lead San Francisco attorney Alison Cordova:
According to a recent report by NPR, the recent announcement by Obama expanding the “Pay as You Earn” student loan repayment and forgiveness plan “is the kind of announcement that makes for feel-good headlines, but, once the news cycle has passed, how much will have really changed? The fact is, there’s been a serious flaw with the program up to this point: few people have actually signed up for it.”
What makes this information even more disheartening is that according to a White House fact sheet, most student borrowers should now qualify for the program which allows students to repay federal loans as a percentage of their income for 20 years, with a full discharge of whatever is left after 20 years. If you are working in a public interest position, then it is a full discharge after only 10 years!
Despite this, few have signed up. According to NPR, the problem is that Sallie Mae – – a private servicer of many federal student loans – – does not inform students about the programs and in fact pushes students toward alternative, independent payment plans. From our perspective, lack of information and difficulty in signing up are certainly part of the problem. However, another piece that the article doesn’t touch upon is that you cannot qualify for the repayment plan if you are currently in default on your loan. Thousands of student loans are in default and many student borrowers would like to be in a government repayment and forgiveness program, but they are not in a position to get current on their loans. This is a problem the government has failed to address, but could easily change.