The Obama Administration has announced a plan that will ease the pressure of student-loan payments on college-age borrowers.
Under the “Pay as You Earn” plan, which President Barack Obama announced at a speech in Denver, borrowers will be able to cap their loan payments at 10 percent of their income as early as January. Furthermore, loan debt would be forgiven after 20 years.
“The idea is how do we make college more affordable and how do we make you have less debt,” Obama said.
Income-based repayment has been offered since last year, but only 450,000 of 36 million eligible borrowers have applied for the plan, according to the U.S. Department of Education.
“The program is not well known,” said Heather Jarvis, an expert on student loans. “Borrowers aren’t aware it exists, and it’s difficult to figure out exactly how to apply for it and exactly how much you’ll benefit.”
According to the Project on Student Debt, 66 percent of Ohio University graduates in 2009 had loans. That year, OU graduates’ debt averaged $22,095.
Matt Simmons, a junior studying engineering technology and management, said he has loans and is striving to be responsible about making his payments.
“I have been trying to keep up with it,” Simmons said, adding that he feels 20 years is a reasonable time frame to pay loans off.
Throughout the day, administration officials stressed that the plan would save the average borrower hundreds of dollars a month.
In one example, a nurse earning $45,000 with $60,000 in federal student loans would now pay $690 a month. Under the proposed plan, that payment would be sliced to $239 a month.
“We’re gonna put money back in your pocket,” said Arne Duncan, secretary of Education. “Whether it’s paying the rent, whether it’s buying groceries, whether it’s paying the electric bill or whatever it might be, this is very significant.”
The Consumer Financial Protection Bureau and Department of Education have also teamed up to launch the “Know Before You Owe” campaign, which will help students educate themselves about the different financial-aid packages available.
“We believe that student lending should be about making life better, not making life worse,” said Raj Date, special advisor to the secretary of the Treasury on the Consumer Financial Protection Bureau. “And that’s why we want to make sure that the cost and the risks of student loans are clear to students before they take on that debt.”
Date added that students have three difficulties in determining their financial-aid packages including jargon on aid forms, understanding the different types of aid offered, and determining how much debt is appropriate for their financial situations.
“Borrowers really struggle to get the information they need because everyone’s situation is different, so it’s a little hard to just read the information and just know what to do,” Jarvis said.
Despite the red tape surrounding the student-loan process, administration officials emphasized throughout the day that they believe an educated work force is critical to an economic recovery.
“We’re thrilled to be able to make this happen and have the president announce it today,” Duncan said. “Young people are struggling. They’re struggling to find a good-paying job — they’re struggling to find a job at all. And college continues to be a great, great investment.”
aw333507@ohiou.edu
