Obama Announces a Student Loan Forgiveness Plan That Could Benefit Up to 1.6 Million Borrowers
The cost of college tuition has been skyrocketing, while student debt has been ballooning, swelling budgets and swallowing bank accounts nationwide. The White House has taken notice, however. Today, President Barack Obama announced a student loan forgiveness plan, allowing college graduates to cap federal student loan payments at 10 percent of discretionary income, according to the Washington Post. The initiative will come into action in January, two years before the cap was due to take effect under federal law, which should come as good news to the students at the over 50 colleges and universities in the Greater Boston area.
According to the Project on Student Debt, in 2009, the average debt of students at Boston University was at $30,998, while Northeastern came it at $15,937, MIT at $15,043, Harvard at $10,871 and Tufts at $23,731.
The “pay as you earn” program could benefit up to 1.6 million borrowers, reducing their payments by as much as a couple hundred dollars a month. Administration officials told the Washington Post all remaining debt on the federal loans would be forgiven after 20 years, and that some borrowers who have more than one federal student loan will be allowed to consolidate their debt, “in some cases reducing their interest rates by up to half a percentage point.”
“These are real savings that will help graduates get started in their careers,” said Arne Duncan, secretary of education, in a conference call with reporters yesterday. “These changes could make a big difference in the lives of current college students and recent graduates as they enter one of the toughest job markets in recent memory.”
The student loan initiatives are intended to help “energize the young Americans” Obama has constantly tried reaching through his campaigns. Under the current law, former students are allowed to cap repayments of federal loans at 15 percent of discretionary income, according to the Washington Post.
Last year, Congress approved legislation that would reduce the amount to 10 percent in 2014. Melody Barnes, Obama’s domestic policy adviser, said Obama’s using his executive authority, however, to create a separate provision which will offer the same program in 2012.
Because the administration plans to use savings from the elimination of loan subsidies, Barnes emphasized that the program will not cost taxpayers a penny. Perhaps this was the “change” we were looking for after all.
Image courtesy of Reuters