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FinAid.org founder Mark Kantrowitz on a plan to help rein in rising student loan debt.
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Get fed Cynthia not a student debt -- -- US has hit the trillion dollar mark an updated version of the government's pay you earn plan.
So it doesn't affect today.
So how is planned different and will really help tackle -- the looming problem joining us now -- cancel its founder of -- made it dot org.
Mark I'm glad you're here and I wanna get into the plan because -- definitely some nitty gritty details of that but.
-- we got tuition that is up Citi 2% since two the year 2000.
The delinquency rate campaign these consumer loans back has spiked you actually think that this new plan is gonna help -- not.
It's a safety net for -- students who have borrowed more than their annual income.
It has -- enables them to -- the monthly payment on a percentage of discretionary income as opposed to the amount they -- So that's what it is so let's get into the plan now it's it's regardless of the loan.
We basically are now looking at post graduation how much money they take.
And then we do this little formula and determine how much debt they can carry and that's really all they -- back.
Right it's it's it's the monthly payments is.
Based on a percentage of discretionary income the new plan is 10% which is a third less than the old plan which is 15%.
And then what happens at the FF after ten years.
Absurd after twenty years rate it's forgiven -- Right in the old -- after 25 years and repayment the remaining balances forgiven the new plan purchase -- up to twenty years.
Now for most far is this simply means that.
They're not go to reach that -- this point -- paid off the loan after 1518.
Years.
But for borrowers who are in very -- financial situation for an extended period time they might actually have some forgive.
This net this is part of the health care bill is sort of that slipped -- -- -- really even noticed.
Ten years forgiveness on loans for those who take public service jobs.
Do you think that this in the mean that this is right for our moral hazard though because it.
I'm model they got all this day he going to grad school and medical school and then -- -- -- -- -- -- -- -- -- not to -- Well the potential for moral hazard is only at the graduate school level.
At the undergraduate level -- loans have limits 31004.
-- dependent undergraduate student.
That pretty much prevent most students from borrowing too much but for four graduate students as a grad plus phone which is up to the full cost of education.
And so there's some potential there are no actual.
And data as yet but there's a potential that a graduate student that said I'm just gonna borrow to the limit because I can.
Here's -- thing this doesn't solve the problem the problem is the accessing easy money.
So these kids have access to easy money the institutions know this and they keep jacking the rate of tuition so until we stop that problem.
This is -- -- yet another -- -- that the government really seems to have a big.
Box.
Right it's it's a bandit after the fact.
What we need to do is more before the fact we need to reduce the borrowing by increasing grants we need to to have better counseling of the borrowers.
Before they take on the debts of that they can be smarter borrowers yeah and -- institutions have to stop Jack -- -- Mark cancerous founder of -- -- dot org thank you for taking the time.
Thank you -- me.
