According to information provided by the National Center for Education Statistics website, during the decades 2001–02 and 2011–12, the cost of attending public institutions, including undergraduate tuition, and room and board, rose 40 percent. Prices at private nonprofit institutions also increased, though not as dramatically, by an estimated 28 percent. What this has meant for the average New Jersey college student is in an increase in the amount of student loan debt with which one graduates.
In the present economic climate, student loan debt has been described as suffocating, and is often cited as one of the reasons for the rise of the so-called “Boomerang Generation” -- college graduates who return to live once more with their parents. However, recent news suggests that there may be some loan debt relief on the way for more people.
President Barack Obama has widened the eligibility qualifications for the Pay As You Earn program, allowing for more borrowers to take advantage of monthly loan payment caps amounting to 10 percent of discretionary income. PAYE is designed to provide financial relief for those experiencing financially unstable periods, such as recent college graduates, and features some benefits.
In addition to placing a cap on monthly payments, your loan balance can be forgiven after 20 years of repayment.
If you work full-time in the public service sector, and have made 120 full monthly payments on time under PAYE, you are also eligible to have the balance of your direct loan or loans forgiven.
However, the recent law changes do come with one potentially key disadvantage: If you are not working in an occupation that the federal government defines as “public service,” then any balance forgiven after 20 years is treated as taxable income. Yes, that is right: you will be liable for taxes on the forgiven amount.
If you find yourself having difficulty making ends meet because of heavy debt burdens, whether from student loans or other obligations, and you think that you may need help up to and including bankruptcy relief, then speaking with a lawyer may be key move to getting through your fiscal troubles.
Source: Boston Globe, "Student loan debt-relief plan isn’t for everybody," Anna Bahr, June 25, 2014