The State of New York has opened up a new student loan assistance program, "Get On Your Feet," which I'm absolutely positive was created in an effort to help some people who are struggling with student loan payments. But as I sit here studying the initiative I'm left with a furrowed brow. I can see some getting the benefit of a short term reprieve but at a big future cost.
The New York "Get On Your Feet" program "offers up to 24 months of federal student loan debt relief to recent college graduates living in the State," says the governor.
"This program offers that help by supplementing the federal Pay As You Earn loan repayment program and allowing eligible college graduates living in New York State to pay nothing on their student loans for the first two years out of school," says the governor's office.
On face value the "Get On Your Feet" program looks like a blessing but the huge black hole is what happens to people who simply fall back on income based repayment programs. Anyone considering any such program should absolutely read "Why Income Based Student Loan Payments Can Be a Terrible Trap."
- be a legal resident of NYS and have resided in NYS for 12 continuous months;be a U.S. citizen or eligible non-citizen;
- have graduated from a NYS high school or received a NYS high school equivalency diploma;
- have earned an undergraduate degree from a college or university located in NYS in or after the 2014-15 academic year;
- have earned no higher than a bachelor's degree at the time of application; andapply for this program within two years of receiving an undergraduate degree.
- be enrolled in the federal Income Based Repayment plan or Pay as You Earn plan;have a primary work location in NYS, if employed;
- have an adjusted gross income of less than $50,000;
- be current on all federal or NYS student loans;
- be current on the repayment of any NYS award;
- be in compliance with the terms of any service condition imposed by a NYS award.
But along with the exploding student loan balance surprise for loans in income based plans, people who jump into the "Get On Your Feet" program need to watch out for the yearly tax liabilities that will ensue. Participants in the program will receive "a 1099 form, issued by the NYS Office of the State Comptroller, reflecting the total loan forgiveness payments made for the tax year." It's just something to be aware of. As a 15 minute application of direct pressure to a wound, the "Get On Your Feet" program can be helpful, but as a tool to really deal with the student loan problem, not so much.
Keep in mind this program does nothing for holders of private student loan debt. Those folks are still adrift on a raft without a paddle.
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This article by Steve Rhode first appeared on Get Out of Debt Guy and was distributed by the Personal Finance Syndication Network.