Update on Loan Forgiveness and Private Loans

In addition to lowering monthly student loan payments, the new Income-Based Repayment (IBR) and the existing Income Contingent Repayment (ICR) programs forgive any remaining debt - including interest - after 25 years. Most borrowers will pay off their debt before then, but under current law, if there's anything left to forgive after 25 years, the amount forgiven would be taxed as income to the borrower. H.R. 2492 would change that.

H.R. 2492 is a bipartisan bill that would prevent the taxation of debt forgiven through IBR or ICR. Thanks to your calls and emails up to this point, the bill now has 31 co-sponsors in the U.S. House of Representatives and the support of the Obama Administration. We need your continued help to keep the momentum going as we head into the very busy end of the legislative session.

Please take a moment to write to your representative and urge them to support H.R. 2492. It will ensure there's really a light at the end of the tunnel for responsible borrowers.

Take Action to Rein in Private Loans

The Obama Administration is pushing for the creation of a new Consumer Financial Protection Agency (CFPA), which would protect consumers from risky financial products and services, including private student loans. A strong CFPA would help protect private loan borrowers from deceptive marketing and unfair loan terms and treatment. 

The financial industry is lobbying hard against the CFPA, and consumers need to speak up before it's too late. Please tell your Senators and your Representative that we need a CFPA with authority over all private student loans to protect borrowers and ensure private loans are only used as a last resort.

Hearing on Private Loans and Bankruptcy

On September 23, TICAS president Lauren Asher testified before a House Judiciary subcommittee about the need to change the unfair treatment of private student loan borrowers in bankruptcy. A coalition of 18 student, consumer, college, and public policy organizations are advocating for this change, and prominent legislators pledged to draft and support legislation to treat private loans more like other consumer debt in bankruptcy. We will let you know when a bill is introduced. Your support and action will be critical for success.

 

 

This message was sent to the IBRinfo mailing list on October 20, 2009.

Income-Based Repayment and Pay As You Earn are two ways to help keep monthly payments affordable based on your income and family size. Visit the Department of Education’s Repayment Estimator to find out what your payments might be.
 

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How to switch to the Direct Loan program

If your federal loans are in the Guaranteed (FFEL) program — where your lender is a private entity like Sallie Mae or Citibank — you can consolidate into the Direct Loan program to qualify for Public Service Loan Forgiveness. Even if you have already consolidated your loans in the FFEL program, you may re-consolidate into the Direct Loan program to take advantage of this program.

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