It seems like every day there’s a new area of the economy hurt by the current recession.
Unfortunately, today’s no exception. A recent report in the The New York Times suggests that student loan forgiveness programs may be in danger of diminishing, which could be bad news for the country.
What Is Loan Forgiveness?
Loan forgiveness works by adding incentives for doing certain types of work: In exchange for agreeing to work in specific fields, usually in a pre-determined area of the country, for a set number of years, the state will forgive a certain amount of your student loan debt. Currently, the government forgives loans for:
- Math, science, special education, foreign language and other shortage-area teachers
- Teachers in low-income areas
- Social and childcare workers
- Peace Corps volunteers
- People with law and medical degrees working in areas in need of their services
Forgiveness programs have several benefits. Here’s an overview of how they work:
- Students choose jobs with relatively low incomes but high value. For example, someone with math or science skills may choose to teach rather than go into banking right away, knowing that a few years in the classroom will eliminate most or all of her student debt.
- Communities in need of skilled professionals get the workers who can help them. Most government programs work by identifying specific places, usually low-income areas, where graduates can work to have their loans forgiven.
- Recent graduates eliminate worry often associated with educational debt. Because student loans cannot be discharged in most bankruptcy filings, it’s important for graduates to repay them, and forgiveness programs help them do so.
Recession = Less Loan Forgiveness?
Now, many states are struggling to balance their budgets and forgiveness programs are reportedly seen as non-essential in many cases.
And the federal government and private sources of income are similarly strapped, which translates to less money all around.
It’s not hard to figure out what this could mean in the long run: current students will be less likely to enter low-paying fields because they’ll have heavy loans to repay.
Those currently in loan forgiveness programs may look for better-paying work elsewhere if their forgiveness amount is cut. And communities in need of competent nurses and teachers will suffer.
If you're neck-high in debt, take some time to learn about filing bankruptcy.
Tags: loan forgiveness, recession, student loans
This entry was posted on Wednesday, June 3rd, 2009 at 3:14 pm and is filed under Bankruptcy and the Economy. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
I hear all of these words of council instructing us to avoid debt and not purchase things that are not needed. I am currently living in a 2 bedroom house with my husband that we are renting. The dream of owning a house, and raising children seem farther and farther away. At this rate, it will take nearly 8 years to pay off my debts, and I am 36 years old now. I do not see how we can survive without my husband and I both working full time, and that is not including renting or owning a place of our own, and how can we possibly raise children in that situation?
With the economy starting to have financial strain, the job did not come through for me. Now I was living in Nebraska, my home town, devastatingly in debt, without a career and making $11 an hour. I was dealing with the most stressful year of my life and with overwhelming financial demands. I applied for a one year economic deferment for a $37,000 student loan and it was granted. But what happens when the defirmint ends? I am only locking the monster in the closet for a short time. It will be back, meaner and scarier than ever.
My parents re-mortgaged their house to consolidate $20,000 of my student loans, not including the one that had gone into deferment. Currently, I pay my parents $500 a month toward the debt. Now, if I file bankruptcy, my parents will loose their home. If I am unable to pay my debts at this point, my parents will be financially compromised, as well as myself. I�??m not sure that my parents assisting me was such a good idea, but at the time, it seemed like the only viable option. After two months of stress, I finally landed a full time job paying $8 and hour, and was very blessed to do so in this economy. But that ended at Christmas time, due to economic cutbacks. Again, after two months, I was able to land a part time job making $10.50 an hour. I am currently looking for another full time, or part time job with little success. In this economy, I am very blessed to be employed at all. Many of my friends, and people I know are getting laid off here and there.
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