This IS a good idea….
Borrowers are hapless to see orignal loan amount multiply to times the orignal principal to numbers impossibe to be repaid….
A new rule proposed by the Education Department could transform the way student loan interest is capitalized, possibly saving borrowers thousands.
Interest capitalization is a lesser-known student loan mechanism that occurs when a loan, while in a grace period such as deferment or an income-driven repayment plan, continues to accrue interest that’s then added to the principal balance.
This results in the loan’s interest rate being applied to an ever-growing principal balance, something the department wants to change.
It’s proposed eliminating capitalization when a borrower enters repayment, exits forbearance, defaults on a student loan or exits most income-driven repayment plans, saying it will “help borrowers who struggle to repay their loans.”
However, the proposed rule states there will still be instances in which interest capitalization can occur, as required within the Higher Education Act.
Proposing limits will help borrowers, as student loan debt in the U.S. currently totals about $1.7 trillion, while the average federal student loan debt balance is $37,014.
Lawmakers are pushing for further reform. Sen. Sheldon Whitehouse (D-R.I.) on Monday proposed a bill that would make it possible for student debt holders to refinance their loans at zero percent interest….