We had a Parents Pluss loan for our daughter who graduated in 2017. These loans are structured same as a federal student loan only the parent pays it back.
If the borrower pays the money back while still in college simple interest is added to the outstanding principle. If you wait for the grace period to pass then the interest from the date the loan was dispersed to the end of the grace period is added to the principle and simple interest is added to that new amount.
This is what we did, waited for the grace period to end then about $9k was added to the amount borrowed in our case that was $21,000.00 at 8% interest.
We started paying this in March 2018. Two years later all of the fed loans were placed in forbearance. We continued to make payments taking advantage of the no additional interest principle only. Because of this we paid our $21,000.00 loan in about 3.5 years. Still the total amount we paid was $33,000.00 on a $21,000.00 loan. It is easy to see from this example why borrowers are in such great distress, made worse if the student either doesn't finish to degree or has a degree in something worthless.
My understanding is, as the forbearance is now 2 yeas old, the number of borrowers not making any kind of payments is about 90% meaning only 10% are making payments. Yet the government is still throwing loan money at present college students. That money has to come from somewhere because it is not coming from borrowers making payments, putting money back into the bank. So if the government forgives $10k then it also had to replace that money to make new loans, so a 10K gift costs the taxpayers somewhere around $20k, at least in the short term. For this and reasons related to the money supply and the unhappiness of those who actually paid their loans, forgiveness will never happen. I believe it is intentional, to make college students slaves to the government.
