Obama Student Loan Debt Relief Plan
marcos
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[url][http://moneyland.time.com/2011/10/26/obamas-student-loan-plan-to-offer-welcome-debt-relief/[/url]
Obama’s Student Loan Plan to Offer Welcome Debt Relief
By KAYLA WEBLEY | @kaylawebley | October 26, 2011 |
2
JOSE LUIS PELAEZ / GETTY IMAGES
In a move sure to be popular with recent college graduates, the Obama Administration released details of a plan Tuesday that will ease the burden of student loan debt. The first and perhaps most welcome part of the plan moves up the start date on the income-based repayment program passed by Congress last year from 2014 to 2012. According to a statement released by the Administration, under its “Pay As You Can” plan, an estimated 1.6 million students will be able to cap their loan payments at 10% beginning next year.
(GALLERY: The 20 Colleges With the Most (and Least) Student Debt)
Additionally, beginning in January, the some 6 million students who hold both direct government student loans and government-backed private loans will be able to consolidate their debt into one government loan. In effect, that part of the plan allows students to refinance private loans at a lower government rate, which according to the Administration amounts to an interest rate reduction of up to 0.5%.
The plan will also allow student debt to be forgiven after 20 years, compared with 25 years under current law.
Obama will formally announce the executive action — the third in as many days aimed at bypassing Congress and boosting his re-election campaign — at an event in Denver later today, the same day as a report from the non-profit College Board shows tuition and fees at public colleges nationwide rose more than 8% this year. It also comes on the heels of USA Today story last week, which — using data from the Department of Education, the Federal Reserve Bank of New York and other sources — found that for the first time ever student loan debt is expected to hit $1 trillion. It is also the first time Americans have owed more on student loans than on credit cards.
The skyrocketing student loan debt is especially unwelcome for the Class of 2011, which received the unwelcome distinction of becoming the most indebted graduating class ever. In fact, USA Today found students today are borrowing double the amount they did 10 years ago — after adjusting for inflation.
(MORE: Scariest Student Loan Debt Numbers Ever: $100 Billion, $1 Trillion)
Not only are Americans taking on more student debt, they are not paying it off as quickly. In the wake of the recession, consumers have prioritized paying off credit cards and mortgages, which often carry higher interest rates, at the expense of student loans. In fact, over the past five years the total outstanding student loan debt has doubled and today more than 1 in 10 people with student loans are more than three months behind in their payments.
But while the news is good for current and former students, it is less positive for the private companies that lend money to students. Shelly Repp, president of the National Council of Higher Education Loan Programs, told the Wall Street Journal, that banks and other firms that supply student loans stand to lose assets and income as a result of the plan. According to the WSJ story, investors rushed to sell off the stocks of some lenders in the wake of the news, including SLM Corp., the parent company of Sallie Mae, which lost nearly 13% Tuesday, while another education-finance company, Nelnet Inc., fell by nearly 7%.
Kayla Webley is a Writer-Reporter at TIME. Find her on Twitter at @kaylawebley or on Facebook at facebook.com/kaylawebley. You can also continue the discussion on TIME’s Facebook page and on Twitter at @TIME.
It's about time, maybe I will not go occupy Wall Street now, sounds reasonable to me. He definitely has my vote between this and the health care plan. Wow, someone that gives a shit about the middle class!
Obama’s Student Loan Plan to Offer Welcome Debt Relief
By KAYLA WEBLEY | @kaylawebley | October 26, 2011 |
2
JOSE LUIS PELAEZ / GETTY IMAGES
In a move sure to be popular with recent college graduates, the Obama Administration released details of a plan Tuesday that will ease the burden of student loan debt. The first and perhaps most welcome part of the plan moves up the start date on the income-based repayment program passed by Congress last year from 2014 to 2012. According to a statement released by the Administration, under its “Pay As You Can” plan, an estimated 1.6 million students will be able to cap their loan payments at 10% beginning next year.
(GALLERY: The 20 Colleges With the Most (and Least) Student Debt)
Additionally, beginning in January, the some 6 million students who hold both direct government student loans and government-backed private loans will be able to consolidate their debt into one government loan. In effect, that part of the plan allows students to refinance private loans at a lower government rate, which according to the Administration amounts to an interest rate reduction of up to 0.5%.
The plan will also allow student debt to be forgiven after 20 years, compared with 25 years under current law.
Obama will formally announce the executive action — the third in as many days aimed at bypassing Congress and boosting his re-election campaign — at an event in Denver later today, the same day as a report from the non-profit College Board shows tuition and fees at public colleges nationwide rose more than 8% this year. It also comes on the heels of USA Today story last week, which — using data from the Department of Education, the Federal Reserve Bank of New York and other sources — found that for the first time ever student loan debt is expected to hit $1 trillion. It is also the first time Americans have owed more on student loans than on credit cards.
The skyrocketing student loan debt is especially unwelcome for the Class of 2011, which received the unwelcome distinction of becoming the most indebted graduating class ever. In fact, USA Today found students today are borrowing double the amount they did 10 years ago — after adjusting for inflation.
(MORE: Scariest Student Loan Debt Numbers Ever: $100 Billion, $1 Trillion)
Not only are Americans taking on more student debt, they are not paying it off as quickly. In the wake of the recession, consumers have prioritized paying off credit cards and mortgages, which often carry higher interest rates, at the expense of student loans. In fact, over the past five years the total outstanding student loan debt has doubled and today more than 1 in 10 people with student loans are more than three months behind in their payments.
But while the news is good for current and former students, it is less positive for the private companies that lend money to students. Shelly Repp, president of the National Council of Higher Education Loan Programs, told the Wall Street Journal, that banks and other firms that supply student loans stand to lose assets and income as a result of the plan. According to the WSJ story, investors rushed to sell off the stocks of some lenders in the wake of the news, including SLM Corp., the parent company of Sallie Mae, which lost nearly 13% Tuesday, while another education-finance company, Nelnet Inc., fell by nearly 7%.
Kayla Webley is a Writer-Reporter at TIME. Find her on Twitter at @kaylawebley or on Facebook at facebook.com/kaylawebley. You can also continue the discussion on TIME’s Facebook page and on Twitter at @TIME.
It's about time, maybe I will not go occupy Wall Street now, sounds reasonable to me. He definitely has my vote between this and the health care plan. Wow, someone that gives a shit about the middle class!
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Right, either way I'm game, this is an issue that has a direct bearing on me. Hate the game, not the player.
I just can't believe student loan debt for 2011 is at $1 trillion and more than credit card debt.
"Becoming a Bruce fan is like hitting puberty as a musical fan. It's inevitable." - dcfaithful
But, the plan also allows Obama to recapture a base of voters that have become disenchanted with him.
"Becoming a Bruce fan is like hitting puberty as a musical fan. It's inevitable." - dcfaithful
I understand the high cost of education at certain schools but not all. Many economists have predicted that this is the next bubble, much like housing, to burst. It's nice that it's being addressed now. It would be a shame to see people walking away from their student debt like people did with mortgages as education is much more of a valued asset that one can truly treasure for the rest of their lives.
I have been disenchanted with him as you suggest, for economic reasons, but for reasons like this and health care will be back on board in 2012.
1) Dot.com stocks being handed out like candy a decade ago
2) Crazy rise in the cost of property from the late 90’s to a couple of years ago
3) Crazy rise in the cost of college tuition in the last 15 years
If you’re going to college and you’re not in a field that offers high pay, I don’t see how one can reason spending over $20K a year on it.
Who's paying for all this?
You are spot on. At some point folks are going to realize that pretty campuses and overpaid professors don't really mean a whole lot in the real world.
yeah, what a dick...how dare he attempt to help...that f-r is just pandering...
this just in, Obama had lunch today...personally, I think the only reason he ate was to sustain energy to campaign...damn that O-bama....damn him to hell....
All we have to do is let him raise taxes.
Well, the fact is the main part of this was not Obama. It was the Democratic controlled Congress. So, you should be pissed at all of them (well aware you were being sarcastic).
But, again - great concept. Who's paying for this? He's just insisted that they write off even more (speeding the process up) than they previously were forced by Congress to do. And a lot of it is our (the gov't) loans. I don't recall voting for you taking even more money out of an already stressed gov't.
This generation will go down as the Generation of Yes - as in we can do whatever we want b/c mommy and daddy will come to the rescue. No need to make good decisions in life. Hopefully, this will be the birth of no.
So, yes - it is pandering. Until someone explains who is paying for this. It's easy to give money away. Not so easy to take it. They are taking it. Who's it coming from? How about Obama explain that for transparency (or is that no longer important in hopey changey land?).
I think the average household credit card debt is $10-$12,000 (households with 10c member: $13,000-$15,000)
Credit Card debt is still easily discharged in bankruptcy, and yes it is still easy to do despite changes made. Student loan debt is hard to discharge unless there are extraordinary circumstances. I think most people understand the value of education and want to pay them back but would like to do so without having to move back in with their parents.
"Becoming a Bruce fan is like hitting puberty as a musical fan. It's inevitable." - dcfaithful
wait a minute, first you say this:
then you say, naaaaw, it's the democratic congress...which is it...? My guess is your supporting Mittens for prez, as you and he like to change positions within minutes...
anyhoo...It's my understanding this will be cost neutral...google is your friend, I don't have time to do for you...
as for the rest of your post...It's sad...I do wonder were this "generation of yes" is ....because all I see lately is a generation of "selfish whiners who worry only about themselves"...
What? So funny. I have no idea who I'm for. The election is 12 months away. There's still a lot to understand about the candidates.
But, the fact the Obama is coming out and pandering NOW has nothing to do with the actual facts of when this whole ball started rolling. On one hand, I was criticizing Obama for using this as a means to getting his base back, and on the other I'm telling you who is really to blame for getting this whole thing rolling. So, it's not flipping. It's looking at 2 different facets of the same situation.
AND - wait for it - now Obama is trying to speed the process up. It's not that difficult to get this if you try. I sometimes think folks have fallen prey to politicians' and media's gotcha mentality instead of trying to understand each other.
Related to the topic at hand, I don't think the government should be involved in doing anything regarding student loans. If a student doesn't like the terms of their loan, DON'T BORROW.
...are those who've helped us.
Right 'round the corner could be bigger than ourselves.
I'm sorry if you took my statement to mean ALL professors are overpaid.
I also agree that professors, at least to my knowledge aren't necessarily overpaid. However, they may not be underpaid either. So, sure some may be over and some may be underpaid. Let's just say they are paid fine for sake of argument.
If the above assumption is true, I'll tell you who is overpaid: high school and grade school teachers. The fact that any high school teacher or grade school teacher is making more than a college professor shows how f'd up our system is. In fact, in certain locations, the average salary for a public school teacher (highschool or grade school) is higher than a college professor.
If you get a PhD, I think one should (on average) make more than the MA/MS counterparts that teach at a lower level of education (high school or grade school). Not saying highschool and grade school teachers don't do a good job, I'm just saying that in my opinion, they don't deserve to make more than college professors.
But, since they do, good for them. I will just continue to vote against the interests that make that possible.
Sorry to derail the thread.
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I can't comprehend being that much in credit card debt... I wouldn't be able to sleep. Don't get me wrong, we have debt (mortgage, car loan, school loans), but if we have $500 on a credit card I get stressed.
was like a picture
of a sunny day
“We can complain because rose bushes have thorns, or rejoice because thorn bushes have roses.”
― Abraham Lincoln
Based on your response...Mittens is your man...
and are you really trying to tell me that you're trying to understand others...?!?!
Cognitive Dissonance anyone...?
Agreed, the current school loan programs and massive increases in tuition are simply unsustainable. My university I graduated from 9 years ago has gone up 100% in price since I was there, and obviously job pay when graduating isn't covering all this cost. Where does all this money go that we pay? Athletic departments, more deans, fancy buildings?
Students should definitely be more active in pursuing a degree from a school that they can afford to go to. I finished my MBA last summer and went to a "lesser" school simply bc it was about 1/3 of the cost of SMU or TCU. There are so many variables that can't prove whether the savings in money will pay off with future pay comparatively, but I felt it was the smarter decision for me.