From Education News: Obama Administration Mulls Graduate Loan Forgiveness Plans
Concerns that President Barack Obama’s budget, which includes graduate school student loan forgiveness, have driven critics to charge that the reforms will produce a greater cost to taxpayers than originally planned.
Allesandra Lanza, in a blog for Student Loan Ranger published in US News and World Report, has discovered a $21 billion shortfall for federal student loan programs. The lack is largely due to a projection of more borrowers using loan forgiveness after 10 to 25 years of of making income-based payments.
As many as 40% of the nation’s federal loan disbursements are for graduate student loans, of which many are more likely to have significant loan amounts forgiven under the income-based repayment plans Pay As You Earn and Public Service Loan Forgiveness, according to the New America Foundation. Dependent undergraduate students can borrow only up to $31,000 in federal student loans, and independent students can borrow as much as $57,500. This means there will likely be no balance after 10 or 20 years of payment unless the borrower has maintained an outstandingly low income over many years.