Stafford Loan Justice

Capitalization/IBR

Just phoned Wm. D. Ford to ask of the Income Based Repayment criteria under the July 1, 2010 changes. Specifically, I was concerned about the continuing practice of capitalization. First I read this:

Income-Based Repayment caps federal loan payments at a reasonable percentage of the borrower’s income and forgives any remaining debt – including interest – after 25 years. It is available for all federal loans made to students. For more information, visit www.IBRinfo.org (Project on Student Loan Debt).

Then headed over to ibrinfo.org, where I could locate no info on capitalization. In speaking to the Wm. D. Ford outsource center, I learned that capitalization is still a regulatory practice; nothing in the July 1 policy change has altered the practice of capitalization (essentially defined as interest on previously unpaid interest that is then applied or added to the overall loan balance).

It’s great that after 25 years or 10yrs/120 payment under the Public Service Forgiveness program that loans are forgiven. Higher math not being my strong point, I’d ask the number crunchers in the Web community to ponder: what is the benefit to the Dept. of Ed and fed gov in general to continue the practice of ever-present capitalization on Stafford loans? Perhaps policies I requested under my FOIA request will provide an answer. In the meantime, I’d like a GAO investigation.

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Written by S.

July 20, 2010 at 7:08 pm