Tuesday, December 1, 2009
Students Relying on Loans Wonder Whether Forgiveness Will Last
By Lingxiao Li
The good news here is that the federal Department of Education says that almost all its loan forgiveness programs are safe. “It doesn’t depend on some future Congress for us to come through on most of these,” said Robert Shireman, deputy undersecretary of education. “The majority of them get appropriations for the life of the programs.”
But many states say that financing their loan forgiveness programs depends on state budgets. Given declining tax revenues, that doesn’t inspire much confidence. On Thursday, for instance, Gov. M. Jodi Rell of Connecticut proposed cutting the state’s minority teacher grant program, which awards a stipend that is intended to help students pay off their loans, said Constance Fraser, a Connecticut Department of Higher Education spokeswoman.
The states’ changes — or the mere threat of them — are the latest of several ugly financial developments that have shaken individuals of all ages who thought they were playing by the rules. There are the investors close to retirement who thought they were being conservative only to watch their savings decline 25 percent before bouncing back a bit recently. And then there are homeowners in Miami and Las Vegas with plain mortgages who have found the value of their properties plummeting because of the bad behavior of many banks and their customers.
As for the loan forgiveness programs, they have been around since at least the late 1960s, according to Mark Kantrowitz, publisher of the financial aid site finaid.org. States sponsored them first, to keep residents from moving or to encourage graduates to enter careers where there was a shortage of professionals in particular locations or in certain lower-paying fields. Now, the federal government is involved, too.
So loan forgiveness programs are not some sinister form of social engineering. Nor do they encourage overindebtedness, per se. Education costs what it costs, and if you need to borrow to attend and intend to eat while doing so, then borrow you must. In fact, borrowing to prepare for a career in nursing or law enforcement makes perfect sense if governmental entities are promoting loan forgiveness programs.