<p>I wonder if this is a just a bill or law (see attached below). Does it mean people can borrow as much as they would like?</p>
<p>For example: For a typical high-end COA (cost of attendance) of $60k, what if someone borrows $240k for four years? Even though the annual interest could be as high as $20k (with approx. 8% interest rate), if someone makes $50k per year after graduation, with the new rule, he just needs to pay $5k towards the his debt. After 20 years (lets just for the sake of discussion), he will just need to pay $100k in total and the rest will be forgiven. </p>
<p>Isnt this a good deal? Or there are some restrictions that I am not aware of?</p>
<p>Why College Students Should Vote for Obama
Posted: 03/27/2012 6:55 p</p>
<p>The president has also lowered the cap on the yearly income percentage college graduates have to pay back. Starting this year, students will not have to make loan repayments of more than 10 percent of his or her yearly income. The repayment cap previously was 15 percent. Students will also be eligible for loan forgiveness after 20 years of repayment rather than the previous 25-year requirement. Workers in public service such as teachers, nurses and members of the armed forces are eligible for forgiveness after 10 years of consistent repayment.</p>
<p>It is not a law yet. Even if it becomes law, it can easily be phased out. Our college selection will be focused on finances. And we will not “hope” that this 10% of comp will wash out the debt we sign onto.</p>
<p>This will only cover federal loans. Undergrads are still not going to be in a postition to borrow $240K (parents can borrow the money, but the new law will not include them). The stafford loan max is not going to change.</p>
<p>The consumer champ’s rule of thumb when it comes to determining what level of borrowing you can comfortably handle: Do not take on loans that exceed the likely first-year earnings in your field.</p>
<p>* Do not take on loans that exceed the likely first-year earnings in your field.*</p>
<p>Since kids often over-estimate how much they’ll be earning or their “higher earnings” are eroded by a high cost of living area, I don’t really like that guideline. I think that the federal student loan limits of Stafford and Perkins are the max. And, if you’re going into a known low-paying profession (art), then don’t even borrow that much.</p>
<p>mom2collegekids, thanks for your advice. Everyone has different tolerance to the loan amount. You may tilt towards a conservative side. I know someone who is actually borrowing $60k every year, for not even a top-tired school. I will be in engineering/science field. So the expected salary should be above the average. I think my target is not too stretched.</p>
<p>" I know someone who is actually borrowing $60k every year, for not even a top-tired school. "</p>
<p>And your point is? </p>
<p>Many of us know people who’ve borrowed even more than that. What does that prove? Just another example of foolishness.</p>
<p>“I will be in engineering/science field. So the expected salary should be above the average. I think my target is not too stretched.”</p>
<p>Again, higher salaries tend to be in areas where living expenses are higher. I know exactly what it’s like for a newish Engineer to be paying for rent, car, gas, food, phone, insurance, utilities, cable, etc. That “high” salary quickly disappears after paying fed taxes, FICA, state taxes, etc, etc, etc. </p>
<p>When you’re working in a STEM field amongst colleagues who don’t have those big loans, you’ll soon tire of those awful payments that are preventing you from moving forward with your life as your colleagues are.</p>
<p>I’m guessing the author of the column has never taken a course in economics, particularly macro. Her whole column is devoted to the give-aways to the college-aged, but her most important line of all is a throwaway.: “With an unstable job market where work is scarce.”</p>
<p>Perhaps instead of ‘free’ loans, jobs for the college students would be a better thing, huh?</p>