For those already in debt, Clinton supports allowing former students to refinance their loans.
The U.S. government doesn’t allow
student borrowers to refinance their federal
college loans — the only option is to turn them into private loans, losing access to forgiveness programs or income-based repayment. Clinton would change that, allowing borrowers to refinance at current interest rates — which are significantly lower than the existing federal rates. The campaign estimates that this would save 25 million borrowers an average of $2,000 over the life of a loan.
Clinton’s plan also proposes to streamline income-based repayment programs and make them more accessible to the average borrower. There are currently four kinds
of income-based repayment for federal loans, all programs that borrowers have to opt into. Clinton would consolidate them into one payment plan and make enrollment automatic.
She proposes capping the amount that borrowers can be expected to pay per month and forgiving debt after a certain amount of time.
The average student loan payment in 2016 is about $350 a month, or $4,200 annually, according to Forbes
. For new grads making entry-level salaries, that can be a big chunk of change. Clinton’s plan would cap the total amount that borrowers can be expected to pay back at 10% of their total income.
Also important for long-term borrowers, Clinton proposes a debt forgiveness plan for those with a history of steady payments. Remaining debt from federal loans would be forgiven for borrowers after 20 years. Those working in public service would have an even shorter time to wait — Clinton promises
to forgive debt after 10 years if a borrower is working “in the public interest,” a category which includes AmeriCorps teachers or teachers in subjects with instructor shortages.
She doesn’t mention bankruptcy as a way to discharge student debt.
Student debt is one of the few kinds of debt, along with mortgages, that is difficult to discharge in bankruptcy procedures
. That means that even after filing for bankruptcy, former students may remain tens of thousands of dollars in debt. Unfortunately for those in financial distress, that doesn’t seem likely to change under Clinton. So, make those loan payments — or they will keep coming back to haunt you.