Lately I’ve been getting a little worried about funding for my future education that possibly takes me to an out of state university, as I should finish my pre-requisites this summer. I saw a news story that helped me stay positive about paying back student loans when the time comes. Obama introduced a plan that will accelerate a Congressional measure that reduces maximum payments on student loans from 15 percent to 10 percent. The plan will go into affect in 2012, 2 years earlier than the previously proposed plan. Also, the new plan changed the amount of time in which loans will be cleared from 25 years to 20 years. These changes affect a huge amount of people and will help students in their initial journey from college into the real world. The savings from lower monthly payments will help graduates better budget for things like mortgages and savings for future children. In an economy like todays, any relief is helpful.
Student loans are a huge contributor to debt in the U.S. According to an article on Student Aid Figures, “86.3% [of students] borrowed to pay for their education and the average cumulative debt was $24,651.” In some cases, students accrue a much higher debt than this figure. Most loans are to be paid off 6 months following graduation. Many graduates are having trouble finding employment after graduation. These problems are few of many that are making life after graduation difficult. With all of these factors adding up students are often overwhelmed. Taking steps and producing plans like Obama’s helps to improve and alleviate stress for graduates.
Passing this type of plan not only helps students and graduates, but it also helps Obama as well. Gaining support from young Americans through plans like these help his chances for re-election. As a student I have benefited from previous education plans that Obama has passed, including his tax return policy for receiving extra sums for enrollment in college courses. Also, through his policies and agendas, it has made financial aid easier to deal with and increased funding compared to previous years. Although it is appreciated, there is still a long way to go to make the education process an easy process for all.
As I largely do agree with the opinions on this editorial regarding the changes to the repayment policies on student loans and debt, there are always so many different situations per student that can enter many variables in to play on this particular issue.
ReplyDeleteI do agree that our current job market, and the mounting debt of the college educated masses is creating a catch-22 in this country. One one hand, you have a great supply of formally educated young citizens who are ready to contribute to society and earn their way in the world like their parents have. On the other hand, perhaps we are just too overpopulated and there flat out are not enough jobs, or even decent paying jobs for educated people to take. Competition is fierce out there for work, and you have about 500 college educated citizens per each professional position available. This does not many a job offer make!
Another variable to the equation of students and their increasing loans and debt is the burden of the older/returning adult college student. Not only is it harder for them to integrate back in to the realm of the college life, but they have fewer years ahead of them to pay off those loans and build up their savings with a decent paying job that may or may not come their way after they get that degree. The older adult student may be paying off student loans well in to their 50's and 60's, with no time in life to save for retirement at all.
I am pleased to see that the Obama administration has taken and continues to take steps towards not only reducing the overall costs of a college education (i.e. reducing or putting a cap on tuition fees) but is also focusing attention on the out of control interest rates on those student loans.
Granted we have a long way to go before this is resolved, as we have a long way to go to figure out the nations job crisis, housing crisis, etc. However maybe there will be some hope after all!!
Though I like the idea of the Student Loan Plan and what it's intended to do, many believe it's not going to help the current students or the previously graduated, because this plan doesn't take effect until next year the citizens enrolling at that time will benefit from this plan. It also will not help you with private entities who have lent money to students.
ReplyDeleteThis Plan isn't designed to reduce the total amount owed on government loans but will be forgiven after the 20 years, so it seems to that if you're poor and have almost no money coming in after graduation then that 10% of your discretionary income will be almost nonexistent. Basically you will end up not repaying all you originally owed.
Another side to this is that since private loans are not being helped here and people can't file bankruptcy (2005 the Bankruptcy Reform Bill means Americans can't declare bankruptcy on their private loans) great as it seems to be, it still has it's flaws.
I liked the editorial but the only part I found to be misreported is the part on repaying student loans: there are several ways to start repayment on loans, when, how soon and how much depends on the options one chooses. For instance a person who has a Direct loan, can chose to pay the standard-$50/mo starting 6 months after graduation but must be paid at the end of the 10 year limit. Some options can give up to 25 years to repay but still allow you the 6 months following graduation to start paying on the loan. None I've seen require you to repay the full amount borrowed with interest by the 6 month end. If you get married, under certain options, Income Contingent Repayment, your spouse's income will be calculated into the amount you'll be paying each month. Thankfully, this plan has changed a decent portion of the original options.