…and what have been proposed recently?
I always thought that one of the biggest “problems” with student loans is that there are no forgiveness programs. In fact, even if you declare bankruptcy you still owe your student loan until it is paid off or you die.
I heard a rumor of a forgiveness program based on some kind of public service… but that was just a rumor.
Some forgiveness programs are based on public service, yes. Veterinarians working in the armed forces have a loan repayment program, based on years of service. Similarly, I think there are some openings for veterinarians within the USDA (and even other non-veterinary positions for other people), where they also offer some sort of loan repayment program. In these cases, it is not a complete forgiveness, but the agencies are saying “Will pay up to X amount per year (usually $20-25K), for up to Y years (usually max 3-5), if you work for us those years (or more)”.
These are the programs I’m more familiar due to my profession. As a note, in the United States attending veterinary school is comparable to attending medicine school in terms of costs. And like medicine students, it is very difficult to keep a regular job that would pay expenses while in vet school.
I don’t think it is a rumor. At least after law school, if you devote 10 years to public service, during that time you pay 10% of your income to repay your student loans and after those ten years, the remaining balance is forgiven tax free.
There is also a 25 year plan, during which I believe that you repay 15% of your income. The problem with that currently is that interest will continue to build and the loan will negatively amortize. So with $200k of student loan debt and a meager salary, in 25 years you will have a forgiven principle balance of over a million dollars which at the present time, you must pay taxes on!!!
I don’t have any links, but the second program is called Income Repayment Plan or some such thing.
This is the fact sheet for the 10 year public service forgiveness:
http://studentaid.ed.gov/students/attachments/siteresources/factsheet_PSLF.pdf
As you can see, there are a number of ways to qualify for it. I’ve read in the past that you do not have to pay taxes on loans forgiven for public service but that you do for any loans forgiven under the 25 year forgiveness available to everyone. I forget the exact rationale for that, but I believe it had something to do with the latter being closer to a gift. I don’t know what that made the former that it was exempt.
Nothing on recent proposals?
FWIW… my question was prompted by a teacher friend who said he is getting 1/5 of his loans forgiven. He has been at the same school in the same small school system for about 20 years. Apparently more of the students in his school qualify for free or subsidized lunches this year so he qualifies.
Hey, the USDA thing I posted was from 2-3 years ago, I’m not that old! 
I also remember the passing of a similar loan forgiveness or loan repayment program law. The problem then, as now, is the availability of funding. That is, even if veterinarians line up to take those jobs (which many won’t), there wasn’t any money to pay back the large amounts of money owed. I think that was partially solved, though, since a couple of years after I first learned of that I saw the job postings from the USDA.
I just got some email about this yesterday:
Looks like it would 1)apply to everyone 2) expand some existing"public service" program and 3) change a primary physician program.
I don’t believe it expands the public service program (which was discussed above). It just shortens it to being forgiven after five years instead of the current ten.
Also included is the ability to consolidate private student loans. This would be a pretty big deal for a lot of people.
Obama is on the campaign trail this week and I’m hearing/seeing references to college loan interest rates. Anything more on actual forgiveness?