Colleen27
DIS Veteran
- Joined
- Mar 31, 2007
According to some research at least currently Federal Student Loan Rehabilitation programs use this formula:
"Under a loan rehabilitation agreement, your loan holder will determine a reasonable monthly payment amount that is equal to 15 percent of your annual discretionary income, divided by 12. Discretionary income is the amount of your adjusted gross income (from your most recent federal income tax return) that exceeds 150 percent of the poverty guideline amount for your state and family size. You must provide documentation of your income to your loan holder.
If you can’t afford the initial monthly payment amount described above, you can ask your loan holder to calculate an alternative monthly payment based on the amount of your monthly income that remains after reasonable amounts for your monthly expenses have been subtracted. You’ll need to provide documentation of your monthly income and expenses. Depending on your individual circumstances, this alternative payment amount may be lower than the payment amount you were initially offered. To rehabilitate your loan, you must choose one of the two payment amounts."
I wonder if that above way of doing is is newer or older. That would only be for Federal loans though.
I do agree with multiple things in the article just not completely everything.
There are a couple of things I saw in that story that raised questions for me. First - and I'm not sure how new this is - the student loan entrance/exit counseling does caution about reading the full terms of any consolidation offer, which makes me think there was a significant issue with predatory consolidation programs that prompted that wording. So it is possible that this couple got caught up in something like that - a detail that they may not have owned up to, or which could have been left out to make a more sympathetic narrative. Second - and this one I do think is pretty common - is that people seem to confuse a payment deferral with some sort of meaningful break on their debt. I know quite a few people who basically took an "out of sight, out of mind" approach to their loans when they were approved for a deferral, not fully understanding that the interest would continue to compound and the debt would continue to grow during the time period when they had no minimum payment due. I don't think that's an unusual way of thinking, in terms of minimum monthly payments rather than of the real costs of borrowing, but it is hard to blame the lending industry for that. It is clearly laid out in the application for a deferral so ignorance really isn't a good excuse, at least not for very recent grads (I know because I graduated last year and my loans are currently in deferral, so I've been through this process recently - but because I'm aware of the difference it makes in the interest, I'm making payments even though none is required until next July when the deferral is reviewed and my updated income information is taken into account).
Now, all of this might have been different when the people in the story graduated. I've noticed that these stories do tend to use folks around my age (late 30s) to make their point, and my friends who have really struggled with their student loans are in the same age range, so it is possible that the rules when they graduated were such that more borrowers fell into predatory or untenable repayment situations.