A week after USA Today reported that outstanding student loans would reach $1 trillion before the end of the year, President Obama on Wednesday announced a series of new measures aimed at easing the burden of debt on students struggling to repay their federal college loans.
Speaking to a crowd of college students in Denver, Colorado, the president outlined a new “Pay As You Earn” plan.
According to the original plan, which Congress approved in 2010, borrowers would be able to reduce their monthly payments from 15 to ten percent of their discretionary income as of 2014. Additionally, that plan dictated that the balance of borrowers’ debt would be forgiven after 20 years of payments rather than in 25 years. On Wednesday, the president said he would use an executive order to make those benefits available to borrowers as early as 2012.
The administration’s plan would also enable recent graduates to consolidate their loans and achieve lower interest rates, and set up a program aimed at helping students better understand their options when taking out loans.
While outlining the “Pay As You Earn” plan on Wednesday, the president spoke of his own struggles with student debt.
“I know you’re hearing stories from friends and classmates and siblings who are struggling to find work, and you’re wondering http://getbadcreditloan.com/payday-loans-ok/ what’s in store for your future. And I know that can be scary,” Mr. Obama told the crowd at the Colorado University – Denver. “This is something Michelle and I know about firsthand. I’ve been in your shoes.”
The president recalled that when he and First Lady Michelle Obama were married, they had about $120,000 combined in student debt. “We combined and got poorer together,” he quipped.
Emphasizing his belief in the importance of higher education as a means to achieving economic growth, the president told his audience that “we want you in school. But we shouldn’t saddle you with debt when you’re starting off.”
According to a new study by the College Board, the increase in average tuition and fees at public four-year institutions has outpaced increases at private nonprofit institutions for the fifth year in a row. The increases exceed inflation rates, the study indicates, and at public and community colleges, costs rose more than eight percent for the 2011 academic year.
“Over the past three decades, the cost of college has nearly tripled,” said Mr. Obama. “And that is forcing you, forcing students, to take out more loans and rack up more debt. Last year, graduates who took out loans left college owing an average of $24,000. Living with that kind of debt means making some pretty tough choices when you’re first starting out.”
In an interview with Hotsheet, Rep. Steve Cohen, D-Tenn., lauded Mr. Obama for his plan and said the president was “right to give these students a way to pay these loans off quicker.”
The proposal would expedite the timeline for an already-approved loan repayment plan that would lower monthly federal student loan payments for Americans whose burden of debt is disproportionate to their earning abilities
“These loans can be phenomenally expensive,” he said, and argued that borrowers who get buried in debt “never get their foot out of the bucket.”
Robert Shireman, former Deputy Undersecretary at the Department of Education and a chief consultant at the education-oriented California Competes program, said the administration’s plan would increase confidence among students about their post-graduate prospects.
Student loan debt has now surpassed credit card debt, for the first time ever
“It means people can go to college and use federal loans and have confidence that it’s not going to drive them to bad personal situations,” he said.