Finding Shock Absorbers for Student Debt

“Finding Shock Absorbers for Student Debt” – The New York Times

I must confess, I was not aware that student loans has surpassed credit card debts as the third-largest form of household debt. I guess I just didn’t expect the problem to be so extensive (is that the right word?) since there are so many scholarship opportunities.

When I was choosing college, I also thought over carefully and chose an institution that will provide me an adequate education without emptying my bank account. Although my parents started saving for my college when I was in elementary school, we also took into consideration the possibility of me continuing education post graduate so we decided that it was not wise to spend all for an undergraduate education.

Recently I have learned about President Obama’s move to expand the Pay as you Earn (PAYE) program for repaying student loans. The expanded program caps the monthly payments at 10% of the borrowers’ income and includes an older group of borrowers. It also appears that the balance on the loan is forgiven after 20 years (10 years for those who work in public service).

This plan sounds pretty good on paper but, as the news article reveals, has flaws in reality because very few people have signed up either because they are unaware of this option or that they experiences problems in signing up. I’m also not too sure about the part where the balance is forgiven after a certain amount of time; I do not know how much balance would remain after those years, but however much it is, who is going to shoulder it? I suppose it’s fine if it’s not a significant amount but what if it is? Shouldn’t people take responsibility for their own financial decisions ?

I think the government should play a greater role in helping people to pay off their debt (e.g. enable refinancing, promote repayment programs, etc.) as well as commit to offer resources that will prevent the high debt problem from generating.