Speaking at the Auraria Higher Education Complex in downtown Denver, President Obama unveiled a plan to give relief to those burdened by student loans. He is initiating the reforms by executive order because he said he is not waiting any longer for Congress to respond to the rising burden of higher-education costs on students and their families.
The President spoke to a large enthusiastic crowd from the three higher education institutions that occupy the Auraria campus—University of Colorado Denver, Metropolitan State College, and Community College of Denver. To cheers from the audience the President said “I’ve been in your shoes. We did not come from a wealthy family” referring to himself and his wife Michelle.
“We were paying more on our student loans than we were paying on our mortgage each month,” he said. “How do we make college more affordable, and how do we reduce your burden? It’s never been more important to get a college education, but it’s also never been more expensive.”
Obama’s executive order will accelerate a program passed by Congress that reduces the maximum required payment on student loans from 15 percent of discretionary income annually to 10 percent. He will put it into effect in 2012, instead of 2014. In addition, the President’s program will forgive all student loan debt after twenty years instead of the current 25 years.
He will also allow borrowers who have a loan from the Federal Family Education Loan Program and a direct loan from the government to consolidate them into one. The consolidated loan would carry an interest rate of up to a half percentage point less than before. This could affect 5.8 million borrowers.
The accelerated “pay as you earn” option could benefit up to 1.6 million low-income borrowers and reduce their payments by as much as a couple of hundred dollars a month, administration officials said.
According to an article by Chris Vanderveen of AP, Student loans are the No. 2 source of household debt. Just today, a new report on tuition costs from the College Board showed that average in-state tuition and fees at four-year public colleges rose $631 this fall, or 8.3 percent, compared with a year ago. Nationally, the cost of a full credit load has passed $8,000, an all-time high.
Anna Van Pelt, 24, a graduate student in public health at the University of Colorado Denver who attended the speech, estimates she’ll graduate with $40,000 in loans.She said Obama’s plan is a “really big deal” for her, “By the time I graduate, my interest rate is going to be astronomical, especially when you don’t have a job,” Van Pelt said. “So it’s not just paying the loans back. It’s paying the loans back without a job.”
“Student loan debt has now surpassed credit card debt, for the first time ever,” Obama said in his remarks. “And when a big chunk of every paycheck goes towards student loans instead of being spent on other things, that’s not just tough for middle-class families, it’s painful for the economy, and it’s harmful to our recovery because that money is not going to help businesses grow.”
The President said his plan will help the nation, because graduates will have more money to spend on things like buying homes. “Our economy needs it right now and your future could use a boost right now,” Obama said.
To the surprise of no one, Republicans blasted the President for this move. “Sadly, the president has once again chosen to put politics before policy, touting a plan that will do nothing to help the nation’s unemployed workers,” said Rep. John Kline (R-MN), chairman of the House Committee on Education and the Workforce. This was reported in the Washington Post.
GOP Leaders in both houses expressed similar sentiments. Of course, they didn’t mention that the same measure would go into affect in two years anyway because Congress passed it. Kline must have been absent that day. Republicans could have acted themselves, but they were too busy p abortion bills.
Others disagreed. Pauline Abernathy, vice-president of the Institute for College Access & Success said Obama’s plan could provide savings that are “in some cases hundreds of dollars a month, which is real money in any economy, especially today’s economy. They are real savings and will make a difference in people’s lives,” she added.
Clearly the audience in Denver was grateful.
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