Ponder this…1 Trillion dollars is the amount of student loan debt owed by American college students. Obama has several choices- certainly broader than the the first two parts of his western presidential campaign excursion, underwater mortgages and financial assistance for hiring vets – because one of his early legislative endeavours was to have the federal government take control of the student lending business in America.
But Obama is currently attempting to use that new ability to get a new taxpayer stimulus that Congress will not approve. The idea is to cap all student loan repayment rates at 10 % of the borrower’s income that goes over the poverty line, then limiting the lifespan of a loan to two decades.
Refinance and Consolidate Education Loans
Take this situation: If Jane Doe gets into Purdue University and borrows $212,000 from the federal government to get an undergraduate degree, her repayment timetable depends on what she earns. If Jane decides to heed the president’s call for public service, and takes a job as a municipal worker earning $25,000, her payments would be $1,411 annually after the $10,890 of poverty-level income is deducted from Jane’s total loan exposure.Two decades at this rate would have taxpayers recover only $28,220 of the $212,000 loan to Jane.
President Obama will allow college student borrowers to refinance and consolidate education loans on better terms, reducing the loan payoff for American taxpayers. The Obama administration’s shift comes at a time when several economists are cautioning of the college “debt bomb” that’s distorting college tuition fees and likely to harm to the credit money markets. President Obama’s move is supposed to make college cheaper for more people, which will, subsequently allow colleges and universities to raise their rates.
A Boost to the Sagging American Economy
Like the housing bubble, easy credit on easy terms increases the amount of money chasing the product (in this instance a degree) allowing schools to raise prices. This inflation makes it tougher for middle-class families to pay for college, driving them to the government financing program, which drives up expenses. Obama’s goals, apart from continuing to encourage the younger generation to shun private industry for service jobs, is to try to stimulate the limp American economy. Individuals who participate in this program could see their monthly incomes rise, thereby raising the cash they have to buy things and try to boost the sagging American economy.
A much more limited program already in place is a failure with just one percent of student loan borrowers enrolling, likely because of the unpleasant notion of additional state and federal government paperwork and reporting. By enhancing the deal and choosing a big PR push, Obama is betting he may get Americans spending soon enough to help with his 2012 presidential re-election. One of the benefits for Obama is the fact he’ll compel the Treasury without needing any Congressional approval due to the passage of what he described as a money-saving measure in ’09.
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