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Obama speaks out about student debt


Monday, June 16, 2014

For today's postsecondary students, the need for college financial aid is significant. According to The Wall Street Journal, the Class of 2014 graduated college as the most indebted group ever. An analysis conducted by Edvisors found that students who took out loans to complete their degree program are graduating with an average debt of $33,000, the source reported. Even when the figure is adjusted for inflation, the amount is more than double what it was in the early 1990s, and it only continues to climb.

Recognizing the struggle of graduates
President Barack Obama has acknowledged that the high cost of education is a problem for too many people across the U.S. In response, he recently announced the expansion of several programs designed to help graduates of all kinds manage student debt. The executive order is designed to make it easier for students to enroll in alternate repayment plans while also capping monthly payments so they remain manageable.

The new and improved programs are scheduled to go into effect in December 2015. According to the Obama administration, approximately 5 million borrowers will be eligible to enroll in these plans, and the hope is that the option will allow graduates to circumvent high monthly payments, eventually preventing individuals from falling behind on payments or defaulting on their loans, both of which can have an effect on credit scores and tax refunds.

"Many student loan borrowers are working and trying to responsibly make their monthly payments, but are nonetheless struggling with burdensome debt," a government official told Reuters.

More about the new repayment plans
According to a White House fact sheet, this move by the president could save millions of students money over the course of their loan repayment. The main aspect of the executive action is the capping of monthly payments to 10 percent of an individual's discretionary income. Borrowers who take advantage of this option can have their remaining balance forgiven after 20 years of payments.

Several of the other provisions also offer the possibility of debt forgiveness, such as for those graduates who go on to become teachers or employees in the public sector. Similarly, those borrowers who have a history of on-time payments may have the balance on their loans forgiven after a certain period of time.

As part of the expansion, the White House hopes to raise awareness of alternative payment options and improve student financial aid for members of the military as well.

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