We’ve all heard it said numerous times: “Education is our future.” Like most other students, the primary reason I chose to attend the College of William Mary was to secure a better future for myself. This future comes at the steep price with an ever increasing college tuition, which may force many students to take out federal student loans. President Barack Obama’s new “Pay as You Earn” program will help 1.6 million government student loan holders.
Obama’s “Pay As You Earn” program is a blanket term for several different tactics designed to reduce the burden of government loans on higher education students. These changes will deliver much needed financial relief to college graduates. Congress approved these plans in 2010; Obama is using his executive powers to enact some of the changes as early as next year. In moving forward the date, Obama is making sure that the program applies to the current generation of college students.
Is he pandering to a key demographic just before election year? Certainly, and I think it’s a smart move. If Obama continues to enact major changes that immediately benefit college students, he is certain to keep a hold on key voters.
One of the major changes would be a new 10 percent discretionary income cap on income-based repayment plans, a reduction from the previous cap of 15 percent. In an example given in a White House fact sheet, a nurse earning $45,000 a year would pay $358 on the current IBR plan; after the enactment of the new policies, the nurse will pay only $239. As any broke college student can tell you, the difference of a couple hundred dollars per month can mean significant improvements in the quality of life.
The new loan relief program will also allow is that people are now able to combine Federal Family Education loans with direct loans. In doing so, the government will also kick in a reduction of the interest rate on the consolidated loans by up to 0.5 percent, another way to save possibly hundreds per month. This component of the plan also reduces the hassle of making payments on multiple government loans each month. Although the White House claims that the confusion of having to pay two different government outlets created a greater loan default rate, I suspect this particular change will not result in a significant decrease in defaults.
All of these plans are steps in the right direction, although I would also welcome restrictions on some of the more dubious private loan offers banks make. Free market is welcome, but many private loans exist to essentially swindle and enslave the owner.
By making the paying off of government loans more realistic, Obama is giving our country better access to the precious commodity of higher education. However, our nation’s outstanding student debt is still expected to surpass $1 trillion this year, well beyond our national credit card debt. In my opinion, this number is pretty clearly playing “follow the leader” with our tuition rates. According to the College Board, in-state tuition has on-average increased 8 percent in 2011 alone.
While our nation may be making progress on a federal level, it is still imperative that our state governments prioritize the accessibility of higher education. It is the only way to ensure a strong future for our citizens. Local governments should now look for ways to help the federal government enable students to both attend college and thrive after graduating.
