In a speech given at the Auraria Campus in Denver, Colo., Wednesday, President Barack Obama announced a plan that would cap federal student loan payments starting in 2012 — two years earlier than initially expected.
The plan would cap student loan payments at 10 percent of a borrower’s discretionary income — down from the current 15 percent rate — and would forgive loans after 20 years rather than the current 25, according to a White House fact sheet about the plan. The changes would apply to Federal Family Education Loans and federal direct loans.
Additionally, students with both types of loans would be able to consolidate them into a federal direct loan, which could potentially lower interest rates by as much as 0.5 percent, according to the plan.
Obama assured the student-filled audience that their investment in education is worthwhile.
“We want you in school,” he said. “But we shouldn’t saddle you with debt when you’re starting off.”
During his speech, Obama said that graduates overburdened by loans are “painful for the economy” because the money they pay every month “is not going to help businesses grow.”
Obama is bypassing Congress and approving this plan through executive action, which does not require congressional approval.
According to the plan, 5.8 million borrowers currently hold both types of loans. Reducing the payment cap from 15 percent to 10 percent would affect 1.6 million more student loan borrowers.
“We can’t wait for Congress to do its job,” Obama said. “So where they won’t act, I will.”
The option to consolidate loans will be available only for a limited time, and those who apply would receive up to a 0.5 percent interest rate reduction on their loans.
Consolidated loans are less expensive for both borrowers and the federal government because both will have to pay less in service fees, said Nancy Coolidge, coordinator for government relations at the UC Office of the President.
“We’re delighted, and we support both elements of this measure,” she said. “We think this will help borrowers who need relief.”
Borrowers earning under a certain amount per year are eligible for the Income-Based Repayment program. Additionally, those who work in public service or for a nonprofit for the better part of 10 years will have their loans forgiven. Those who do not work in public service would have their loans forgiven after 20 years — five years sooner than under the current program.
According to Coolidge, only half of UC Berkeley students take out student loans, accumulating on average about $16,800 in loans during their undergraduate studies. While these numbers are expected to rise, UC Berkeley students still borrow less than those at other public universities, she said.
The Institute for College Access and Success praised the Income-Based Repayment aspect of the plan.
“With the class of 2011 about to face their first student loan payments, there’s no time to waste,” said Lauren Asher, president of the organization, in a statement.
Comment Policy
Comments should remain on topic, concerning the article or blog post to which they are connected. Brevity is encouraged. Posting under a pseudonym is discouraged, but permitted. The Daily Cal encourages readers to voice their opinions respectfully in regard to the readers, writers and contributors of The Daily Californian. Comments are not pre-moderated, but may be removed if deemed to be in violation of this policy. Click here to read the full comment policy.
Hard pressed to find stories of older non-traditional woman (possibly some men, as well) existing with YEARS of mentally dealing (coping) with student loan debt… along with compounded interest & penalties, perhaps dbl-ing their (my) initial loan…
An Army recruiter called me one day to inquire if I’d considered joining the Army to pay off/back my student loans, “Absolutely, sign me up!” I told him. But upon further questioning he’d been forced to reveal that I was too old. Many non-traditional (older) students- myself, included - have little incentive, or hope, other than to wait for the Fed. Gov. to attach our Soc. Sec. checks (if that’s even around ten, or so, yrs from now).
Forget loans, just make public colleges completely free. Let’s face it, it is going to happen sooner or later. Just look at the last ten years. Free music, movies, and books online. Can’t go to a Tower Records, Blockbuster or a Borders bookstore can you? The aging baby boomer work force needs to be replaced in ten years. If college students could afford to pay $50K a year (a new car) they wouldn’t be in college to begin with. Colleges started charging more because the privates school were outbidding for boutique professors. Let people graduate for free and let those at private schools pay for the boutique classes that is beyond the basics. These professors are getting cut from the public universities anyway with no money for non-essentials classes.
Half the country is retiring! Fill up those classrooms for free and graduates can get work faster and pay taxes to offset the benefits checks!
Clock is ticking…
Cut costs: save students from debt.
UC President Yudof
and Chancellor Birgeneau ($450,000 salary) have dismissed many much needed
cost-cutting options. They did not consider freezing vacant faculty positions,
increasing class size, requiring faculty to teach more classes, doubling the
time between sabbaticals, cutting and freezing pay and benefits for all
chancellors and reforming the pension system.
They said such faculty
reforms “would not be healthy for University
of California”. Exodus of
faculty and administrators? Who can afford them and where would they go?
We agree it is far
from the ideal situation, but it is in the best interests of the university
system and the state to hold the line on cost increases. UC cannot expect to do
business as usual: raising tuition; granting pay raises and huge bonuses during
a weak economy that has sapped state revenues and individual Californians’
income.
There is no
question the necessary realignments with economic reality are painful. Regent Chairwoman Lansing can bridge the public trust
gap with reassurances that salaries and costs reflect California’s economic reality. The sky above UC will not fall
Opinions? Email the UC Board
of Regents [email protected]
Discrimination against Californians by University of California.
Chancellor Robert J Birgeneau ($450,000 salary) displaces Californians qualified
for public university education at Cal.
for a $50,600 payment by a foreign student. The need for transparency at UC Berkeley
has never been so clear.
UC Berkeley, # 70 Forbes ranking, is not increasing
enrollment. Birgeneau accepts $50,600
FOREIGN students at the expense of qualified instate Californians.
UC Regent Chairwoman Lansing and President Yudof both agree
to discriminate against Californians for the admission of foreigners. Birgeneau,
Yudof, Lansing
need to answer to Californians.
Opinions make a difference; email UC Board of Regents [email protected]
Appears this is yet another tiny Obama deal that probably helps bring money into the Direct Loan enterprize. A very limited number of borrowers can take advantage of it. Gee Whiz! A cap of 8.25% How much interest to you earn with your savings? Information at http://www.studentaid.ed.gov.
President Obama bent over backwards to try to get deals with Congressional Republicans. When he did make a deal, the GOP had a strong tendency to come out ahead; Republican leaders were even crass enough to state to the public they got what they wanted.
The S&P Tea Party down grade will be seen as the tipping point just like Katrina was the tipping point for President Bush.
President Obama’s tactic of using executive orders is both pragmatic and a politically shrewd.
[The S&P Tea Party down grade will be seen as the tipping point just like Katrina was the tipping point for President Bush.]
The fact that you think the Tea Party had anything to do with the S&P rating shows how far you are completely removed from reality, fruitcake. The Tea Party people don’t occupy the executive or legislative branches of the federal government.
Our Downgraded Prez is clueless about the incentives that create economic growth, jobs and rising incomes.
His policies failed so now he resorts to class warfare, more regulation and government by executive order. One term and he’s gone.
Read the text of S&P’s Tea Party down grade.
You have a very poor mind for politics.
Barry O’Fraud is a Joke
“It’s entirely incoherent,” Charles Krauthammer said of Obama’s plan to pay down student loans. The numbers were run by an economics correspondent today in The Atlantic magazine. And It turns out what he is offering the students is between $4.50 and $7.70 a month of relief.”
Now these are students that he addressed today and spoke about their carrying an average of $25,000 in loans. So what he’s saying is ‘I’m going to save you, I’m going to give you a quarter of a part of it back a month. This is keeping with all of the promises he has been making in the last campaign tour in which he promised relief to homeowners in a program which has already failed. And now he is doing it on student loans. If his audience had known how minuscule is the benefit, he would have been laughed out of that auditorium.
Ha ha, O’Clown=Fraud=FAIL
This “student debt relief” shindig is the same, empty, smoke-and-mirrors misdirection that Obama has used on every other issue.
http://www.theatlantic.com/business/archive/2011/10/obamas-student-loan-action-wont-have-much-impact/247411/
Why is a JP MORGAN executive the president’s chief of staff?
Why is prince of de-regulation Geithner running the Fed?
Why was king of de-regulation Summers head of Obama’s economic team?
http://en.wikipedia.org/wiki/Brooksley_Born#Born_and_the_OTC_Derivatives_Market
The Obama transition team? Rubinite NeoLibs to a man:
http://www.rollingstone.com/politics/news/the-great-american-bubble-machine-20100405
public option for health care? no.
expiration of Bush tax cuts on the wealthy? no.
closing Guantanamo? no.
War in Iraq is bad/he got a nobel peace prize? More like a new war in Libya and now several central African states, unabated drone strikes in Yemen, the killing of US citizen al-Awlaki’s w/o trial AND also the KILLING of his 16 YEAR OLD SON – ALSO US CITIZEN – W/O TRIAL in a separate strike a week later.
http://politics.salon.com/2011/10/20/the_killing_of_awlakis_16_year_old_son/singleton/
That 16yo kid was born in fucking Colorado – and Obama toasted his ass with drone-fired missile like it wasn’t shit but another day in the White House.
http://www.washingtonpost.com/wp-srv/world/documents/abdulrahman-al-awlaki-birth-certificate.html
The HAMP mortgage program? systematically used by banks to push current borrowers into default and foreclosure.
The “new” HARP mortgage program? good for the banks, little positive impact for borrowers!
http://neweconomicperspectives.blogspot.com/2011/10/does-obamas-housing-plan-miss-mark.html
http://www.nakedcapitalism.com/2011/10/on-the-administrations-latest-potemkin-help-struggling-homeowners-plan.htmlhttp://www.creditslips.org/creditslips/2011/10/the-sweep-it-under-the-rug-housing-plan.html