The Student Loan Forgiveness Act of 2012 (H.R.4170) was introduced in House of Representatives by Michigan Rep. Hansen Clarke earlier this month with the goal of reducing the debt of college students and slowing the rising cost of tuition. Under the plan, a student would pay the equivalent of 10% of their income per year for 10 years. At the end of the 10 year period, the remaining debt would be forgiven. IF a student works in the public sector (as a teacher for example) the debt would be forgiven after 5 years.
The bill points out the rising cost of tuition and that in 2012 the amount of student loan debt in the US will reach the $1 trillion mark. The bill suggests that forgiving this debt will give these students the extra income to buy a home, start a business, or invest. The bill argues that it is a necessity to possess at least a bachelor’s degree to earn a living wage, but the price of the degree is rising at alarming rates.
The following is the beginning and the findings of the bill (link to the full text HERE):
Student Loan Forgiveness Act of 2012 (Introduced in House – IH)
To increase purchasing power, strengthen economic recovery, and restore fairness in financing higher education in the United States through student loan forgiveness, caps on interest rates on Federal student loans, and refinancing opportunities for private borrowers, and for other purposes.
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
- This Act may be cited as the `Student Loan Forgiveness Act of 2012′.
SEC. 2. FINDINGS.
- Congress finds the following:
- (1) A well-educated citizenry is critical to our Nation’s ability to compete in the global economy.
- (2) The Federal Government has a vested interest in ensuring access to higher education.
- (3) Higher education should be viewed as a public good benefitting our country rather than as a commodity solely benefitting individual students.
- (4) Total outstanding student loan debt officially surpassed total credit card debt in the United States in 2010, and is on track to exceed $1,000,000,000,000 during 2012.
- (5) Excessive student loan debt is impeding economic growth in the United States. Faced with excessive repayment burdens, many individuals are unable to start businesses, invest, or buy homes. Relieving student loan debt would give these individuals greater control over their earnings and would increase entrepreneurship and demand for goods and services.
- (6) Because of soaring tuition costs, students often have no choice but to amass significant debt to obtain an education that is widely considered a prerequisite for earning a living wage.
- (7) Amidst rising tuition rates and stagnant grant funding, many students are forced to supplement Federal loans with private loans, which frequently feature higher interest rates with fewer consumer protections.
- (8) A borrower who experiences an extended hardship for whatever reason, or a borrower who experiences a series of separate hardships over a longer period of time, will often have no choice but to default on his or her private student loans. Opportunities to put such private loans into forbearance are limited.
- (9) During the period of forbearance on private student loans, interest continues to accrue and is capitalized, and once the borrower comes out of forbearance, he or she owes significantly more on the principal of the loan than before the hardship period began.