Provisions – JerseySmarts.com

While playing around on Facebook the other day, I came across Robert Applebaum’s “group” called Cancel Student Loan Debt to Stimulate the Economy. On the group home page, Applebaum goes into detail on how canceling student loan debt would stimulate the economy in a variety of ways. Here is only a sampling of what this lawyer-turned-advocate suggests:

Forgiving student loan debt would have an IMMEDIATE stimulating effect on the economy. Responsible people who did nothing other than pursue a higher education would have hundreds, if not thousands of extra dollars per month to spend, fueling the economy NOW. Those extra dollars being pumped into the economy would have a multiplying effect, unlike many of the provisions of the new stimulus package. As a result, tax revenues would go up, the credit markets will unfreeze and jobs will be created.

Let me be clear. This is NOT about a free ride. This is about a new approach to economic stimulus, nothing more. To those who would argue that this proposal would cause the banking system to collapse or make student loans unavailable to future borrowers, please allow me to respond.

You can go read Applebaum’s group page to see how he responds to the obvious criticism. What strikes me is that that aggregate student loan debt in America is roughly $600 billion. The government passed $700 billion in stimulus spending last October (which has been a failure) and another nearly $800 billion last month. Plus there is a spending bill currently before the Congress that would increase the number of dollars being spent on ridiculous earmark projects. By some estimates, in total we could be spending $2.3 trillion on stimulating the economy…with little of that actual money going directly to benefit the middle class.

Applebaum’s suggestion is an interesting one and given the personal nature of the suggestion, each person who supports or rejects it will have specific reasons why. Many of those who reject it will project their life experiences on the stories of those who support it (a common, aggravating problem in the student loan world). Likewise, many of those who support the proposal will have a level of debt that could likely be paid off after a few years of hard work and saving. But there were always be exceptions that drive the argument forward in some people’s minds. You can find some of those exceptions by reading the a petition currently on The Petition Site calling for Applebaum’s plan to be put into action.

I signed the petition and added a little bit of my story, which I think suggests why enacting a student loan forgiveness policy would be beneficial for me. Here is my little blurb, reprinted for your reading:

I graduated with $118,000 in student loan debt. Without taking out these loans, I would have never been able to receive the high quality education that I did. All I did was pursue the American Dream…and now I pay about $1,000 each month because of those student loans. I have a great job and I still can’t buy a home – heck, I can’t even buy a new car! I’m still making my payments and I’m still paying down my debt (down to $104,000 now). But if I could use that extra money each month to buy a home or a new car, I would do it in a heartbeat. However, on the path that I’m on now – neither purchase will be possible for at least the next ten years. Great…

I’m not sure if either purchase won’t be available for the next ten years, but repaying at the rate that I’m currently going (which is above and beyond the minimum monthly payments) will certainly put me on that timetable. Something needs to be done and though I have a few different ideas about how I plan on addressing this debt (can’t keep a good man down!), it would be so much more effective if the government stopped collecting it’s 4.75% interest rate off of the $50,000+ that I owe it in principle.

I don’t want a handout and I know that if things don’t change, then I’ll be able to payoff my student loans in due time. But during a time when Wall Street executives are getting million dollar bonuses for failing and when banks, insurance companies, and the automakers are getting money hand over fist from the government, you would hope that – at some point – someone in Washington steps back and says, “Whoa! What are we really doing here?!” If somebody would do that and champion this cause over the current bailout causes, I think it would truly stimulate the economy.

Yesterday, I found out that the rules and regulations for the College Cost Reduction and Access Act of 2007 (CCRAA) were finalized. These regulations included something called the Public Service Loan Forgiveness Program. In short, this program allows those working for nonprofit organizations to have the balance of their federal student loans forgiven after ten years of payments (with the clocking beginning in October 2007). The payments do not need to be consecutive, they just need to be comprised of 120 monthly payments (paying twice in one month does not count as two payments). I had to find out more about this program, so I contacted the program administrator in Washington, DC to get the facts. Here is our conversation starting with my e-mail to the program administrator:

My name is Joe and I am contacting you about the Public Service Loan Forgiveness Program created by the College Cost Reduction and Access Act of 2007. I have been working, full-time, for nonprofit organizations since May 2005. I have approximately $56,000 in federal student loans (a Direct Loans consolidation loan) and $48,000 in private student loans.

I understand that the private student loans do not qualify for the new provisions, however, I want to confirm that my Direct Loans consolidation loan does qualify. Also, I’ve read that the new regulations apply to payments made from October 2007 forward. Since I make my payments each month, does this mean that I can count my last 14 payments towards the 120 required for the balance of the loan to be forgiven? Is there anyway to count the previous monthly payments that I’ve made since I began repayment in July 2006?

Please let me know if you need any additional information. This is exciting news!

And here is the response from the program administrator in Washington, DC.

Good Morning Joe,

Your Direct loan consolidation loan will qualify for the forgiveness, and will count payments beginning on October 2007 forward. So, all payments made from the Oct. date on will count towards the 120 payments. Sorry, none of the payments made before that date can or will count towards the 120 payments. I’m glad that the public service forgiveness program will be a great benefit for you. If there is anything else I can do to help, please let me know.

A very friendly response from the feds – I like it! I thought that I should return the favor with a comment or two of my own and another question or so.

Thank you so much for the information! A final question or two.

First, do the 120 payments need to correspond to 120 months? Or if I make two payments in one month does that count as 2 payments towards the 120?

And finally, is there anything that I need to sign up for in order to be a part of this program? Or do I just track the payments on my own and when I hit 120 payments I contact Direct Loans?

And, within a matter of minutes, the program administrator replied as such…

One payment per month is what counts towards the 120 payments and direct loans will track the payments for you, we are also in the process of developing a form to have your employer sign as a public service position to tie the job with the payments.

This was perhaps the most pleasant experience that I’ve ever had dealing with my student loans. The representative, Ms. Nikki Harris, was professional and courteous and showed the utmost in professionalism in her prompt responses to my questions. And on top of that, I might be looking at getting some of my student loans forgiven after another 106 payments!

I have to figure out what I’d like to do with this, actually. I’ve been making excess payments on both my private NJHESAA loan and my Direct Loans consolidation loan. However, since I am being charged more on my NJHESAA loan and there is a possibility to have the Direct Loan forgiven at some point, it might make sense to begin adding more to my monthly payments to NJHESAA and then see where I’m at in a few years with the Direct Loans. The problem that I have with NJHESAA, though, is that you can’t make online payments – it’s so archaic.

Anyway, I take this information about the Public Service Loan Forgiveness Program as a good sign. This is a good way to begin the new year!

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