This year, 71% of college students will graduate with an average student loan debt of $29,400. Most are able to repay their loans, but others feel burdened as they start a family, buy a house, or attempt to start a business.
In an attempt to lessen this burden, President Barack Obama, writes David Hudson on the White House Blog, signed a memorandum on Monday which directed the secretary of education to "propose regulations that would allow nearly 5 million federal direct student loan borrowers the opportunity to cap their student loan payments at 10% of income".
The President is attempting to make student loan debt more affordable and more manageable to repay. Obama wants Congress to do its job, as well. A bill, he says, needs to be launched that would allow today's student loan holders to refinance at the lower interest rates that are now available.
Opponents to this idea say that Obama's plan is a political action that leaves the federal government responsible for too much of the tab. Reporting for The Christian Science Monitor, Amanda Paulson reminds her readers that the old system pretty much took a "proportional chunk from all borrowers paychecks" and the 25 year pay back window meant that most ended up paying back a good portion of their debt.
In 2010, legislation was passed establishing Pay As You Earn (PAYE) which capped payments at 10% of income and allowed debt to be forgiven after 20 years, or 10 years if the graduate was employed in public service. Obama promised to extend this legislation to those who borrowed before 2007, or haven't borrowed since 2011.
This means that borrowers who take out large loans may pay but a small portion before receiving loan forgiveness. Some schools are offering a free education by paying off the loans themselves, if the student goes into public service. Even so, for those who are going to graduate school requiring a large loan, like $150,000, there will be quite a difference in their monthly payments.
Obama also remarked that the price of college tuition is concerning and reforms are going to have come from the colleges themselves. He criticized Republicans for considering tax breaks for the wealthy, but resisting lower interest rates for students' college loans, writes David Jackson for USA Today. He adds that Obama's rule only applies to students with federal government loans, not loans from private institutions.
"We actually don't know the cost yet," said Education Secretary Arne Duncan. "Obviously, we have to go through this regulatory process, so we'll figure that out on the back end."
Lindsey Burke, reporter for The Daily Signal, discusses some of the problems, as she sees it, with the president's plan. Burke is a researcher and writer on federal and state education issues and is the Will Skillman fellow in education policy at The Heritage Foundation:
- The plan has little affect on colleges to reduce their tuition. Why would they lower tuition when the government continued to increase student-loan subsidies?
- The subsidies put the responsibility not on the student, but on the taxpayer.
- Three-quarters of taxpayers do not have a college degree. They are not reaping the rewards connected to having a degree, why should they have to pay for students' degrees?
- Sen. Mike Lee (R-Utah) has introduced a proposal to restructure accreditation, which could reduce college costs and increase access to new higher education options.