Loan Forgiveness Program and its Impact on USA's Economy in 2015

In the last five years, a lot has changed in the loan-based education system in USA. Ever since President Obama announced his ambitious Loan forgiveness scheme for low and middle income citizens, the relatively small and insignificant sector of federal loan institution has grown into a multibillion segment today. 

All thanks to the Obama Loan Forgiveness Program. Though the experts on country’s economical situation are wary about the pressure the forgiveness puts on the fiscal stability and economic growth, federal-run loan agencies are upbeat about pushing the education system based on affordable income-based loan repayment schemes.

Economists pushing ideas to drive Forgiveness scheme

The debt crisis from the 90s is yet to die down. The latest numbers from the non-governmental funded loan program is a worrisome prospect for many as the delinquency rate has jumped to USD 1.4 Trillion. This is worse than the segments of mortgage loans during the crisis of housing in USA.

Specific programs like teacher student loan forgiveness and Loan Forgiveness for Nurses moving to strategic implementation in many states. Here are three reasons why economists are pushing ideas to drive Forgiveness schemes on federal student loans.

1. There are   6.9 million Student loan borrowers who have made their first payments already.
2. Student loan applications from teachers and nurses quota have risen by 11.5 percent from the last quarter.
3. Student loan borrowers are paying their monthly instalments on time expecting a quick coverage into the Obama student debt forgiveness program. Leading economists are expecting a windfall of US 3.6 Billion by December 2016, coming exclusively from the loan repayment schemes. This is a big number considering the kind of debt pressure other loans put on taxpayers.

Is job market in USA improving?

Education system has definitely grown ever since the launch of the forgiveness of loan program by federal government. What about the job market? With launch of start-up companies in retail and flourish of digital market across the world, vocational training for which loan was taken seem to be of no use. At least not for those who are taking courses in teaching, nursing and accountancy!

The income-based home loan repayment scheme could fail if the job market and the pay scale of the borrowers do not increase soon. Here’s why economists want to see a change in President’s approach towards loan forgiveness:

• The focus right now for the federal loan providers is to generate new employability options and fill them with skilled candidates.
• Public sector is full of vacant positions. The job market in the public sector has grown by 13 per cent over the last 36 months.
• In the next amendment to the Obama Loan Forgiveness scheme, those working with the private and NGO sectors could also be covered under the scheme as beneficiaries, though with some relevant prerequisites.

For now, Obama’s forgiveness scheme is working for middle and low income categories. Economists are expecting the tide to turn soon.