Loan forgiveness equals student savings

Cody Hardin

The Signal

Kyle Riggs brings a glass of water to a table at a local area Gringos.

As a server, Riggs is used to seeing people come and go in the sometimes nomadic industry. Riggs left the industry in 2008 to go to school at UHCL, graduating in 2010 with a bachelor’s degree in political science.

Riggs went with what interested him, passing up degree plans in business or other “market-friendly” degrees. However, even those degrees haven’t panned out for some of his co-workers.

“I knew a political science degree can only do so much, but it was all I was interested in, so I bit the bullet,” explained Riggs. “I have friends who have degrees in finance who wait tables too so I understood the risk, but while it wouldn’t be easy, I expected to find a job.”

Life after graduation led Riggs to apply for jobs everywhere, to no avail.

“I was dropping 7-10 resumes weekly, until I finally started getting desperate and willing to take anything, regardless if it applied to my degree or not,” Riggs said.

Facing $20,000 in student loans and a fiancée, Riggs found himself back to square one, waiting tables.

Riggs still hopes he can put the degree he earned to use.

“I’m hoping the economy turns around in the next couple years and, in the meantime, I may just go back to college,” Riggs explained.

However, executive orders from the Obama administration may help situations like Riggs’ be a bit less burdensome.

Set in motion in late October, the orders are one of many in the latest “We Can’t Wait” campaign launched by the Obama administration as it waits for another $447 billion jobs bill to be moved by Congress.

The orders, estimated by President Obama to help 1.6 million students lower their financial aid loan payments is just that, a system designed to work with Americans with college debt who are finding it difficult to pay off student loans.

The proposal is entitled “Pay As You Earn,” and bases monthly student loan repayments to be capped off at 10 percent of discretionary income as of July 2014. However, a new proposal has been put in place to allow those 1.6 million to start capping their loans next year.

Those 1.6 million are not the only ones in line to get a break.

The administration is also setting forth to allow another 6 million borrowers to consolidate their loans into one monthly payment, thereby allowing them to receive up to a 0.5 percent reduction.

It is a sound strategy that UHCL Executive Director of Financial Aid Billy Satterfield agrees is worth considering.

“Some students may want to consider after the first of the year [consolidating loans], as those options are available until then,” Satterfield said.
Satterfield also notes that the new plan is basically the current plan, but much faster in action.

“The big thing with that is that it is actually accelerating what we commonly refer to as the Income Base Repayment Plan,” Satterfield said.

Satterfield explains that the old plan allowed for the situation that if students were paying more than 15 percent of their discretionary income, then they could apply for loan modifications and reduce payments. The plan also allowed for forgiveness of whatever was left on the loans after 25 years with timely payments.

Now, under the new plan, a student has 20 years instead of 25 and the rate is cut to 10 percent of discretionary income.

However, while lower payments are fine for most students, others simply want a lower interest rate from the current, as the current economy has made finding jobs a bit more difficult. In fact, the New York Federal Reserve’s newest report states that student loans are expected to surpass the $100 billion mark, with outstanding balances exceeding $1 trillion, passing up credit card debt.

Unlike credit card debt, however, student loans survive bankruptcy, forcing former students to have greater pressure to repay them.

Satterfield quotes the current interest rate for an undergraduate student taking a subsidized loan as 3.4 percent to 6.8 percent for a graduate student with unsubsidized loans.

“They are still a relative low interest rate,” Satterfield said.

Satterfield offers this advice for students who have graduated looking for assistance with their loans.

“The best advice we give students, especially after they have graduated, is to contact their lender,” Satterfield said. “Really, once the school gets the funds and we give the funds to the student, we are out of it.”

Satterfield recommends that students look into federal loans first, as they are in the best interest of the student, but also for those students to ultimately stay in contact with their lenders throughout the process.

“If they’re having loan issues, most definitely they should contact their lender,” Satterfield said.




Video created by The Signal reporters Wardah Ajaz and Debra Machemehl.