So who will be the big winner under President Obama's executive action on loans, allowing more student loans to be forgiven, i.e. payed for by taxpayers? Turns out it might just be the wealthy. From The Washington Examiner
Lawyers, doctors and other highly trained professionals who utilized federal loans throughout their post-high school education could walk away with most or all of their graduate school debt forgiven by the federal government under the program, say experts.
“You can roll it all into one balance and it has a really powerful effect,” said Jason Delisle, director of the Federal Education Budget Project for the New America Foundation, a nonpartisan think tank. “The chances that you will fully repay your grad school debt are very slim.”
Obama on Monday signed an executive order that expands to as many as 5 million people a program allowing federal student loan holders to cap monthly payments at 10 percent of adjusted gross income. The program also includes debt forgiveness after 10 years for those who work for 501(c)(3) non-profits or in the public sector. For those in the private sector, they can stop paying off their loans after 20 years.
So how does this work?
A lawyer with $150,000 in combined undergraduate and law school loans at a 6 percent interest rate, for example, could walk away from the law school debt by going to work in the public sector with a starting salary of $70,000.
Even with a 4 percent raise each year, the public defender or prosecutor who makes on-time payments and utilizes the monthly loan payment cap and 10 year forgiveness program will escape having to pay $187,000.
The rest would be picked up by the government.
Tags: Student Loans