Everybody wants an education, but paying for a good one has become harder and harder.
According to USA Today, this year will be the first time loans will exceed 1 trillion dollars. Reports from the Federal Reserve Bank of New York show Americans now owe more on student loans than on credit cards.
When it comes to student loans, debt has definitely become a problem. There should be more outlets for students to pay for school that don’t automatically place them under a great amount of debt when they graduate, which they will undoubtedly be paying off for years to come.
Reports from the College Board indicate that students are borrowing twice as much as they did a decade ago after they had adjusted for inflation. The total outstanding debt has also doubled in the last five years.
For those who have the HOPE scholarship, the changes in the regulations makes affording school even harder as HOPE will no longer pay the total amount of a student’s tuition, but only 90 percent of it, and books and mandatory fees are no longer included.
This, in combination with the fact that many students and their families most likely do not have the funds to completely pay for college, puts even more pressure on people and leads them to take out loans.
Borrowing money for school affects students not only in the present, but it also dictates what they are able to do in their future. Aside from having the burden of debt and money that needs to be paid off, students may have to put off trips or other important milestones such as buying a house or car.
President Obama has recently announced a way to alleviate some of the strain that students face trying to pay back their loans.
His new plan will allow students who have taken out both direct government loans and loans from the Federal Family Education Loan Program to combine their debt into one single government loan, which would end up reducing their interest rates.
It will also lower the maximum required payment of a student loan from 15 percent to 10 percent of the borrower’s annual income. Another change in his plan will include amnesty for remaining debt after 20 years instead of 25.
Obama’s plan will go into effect next year, instead of 2014.
This plan could potentially save borrowers hundreds of dollars in payments.
Students who choose the option to consolidate their loans will also have the additional loan forgiveness benefit and other repayment options.
Unfortunately, this plan will not affect borrowers who are already in default. According to the Education Department, it only applies to students taking out loans in 2012 or later and those who also took out loans between 2008 and 2012—around 1.6 million borrowers.
I think this would greatly benefit most, if not all college students, because it would give them an easier way to figure out when and how long they will be able to pay off their loans. People coming to college will already be starting out with an advantage, because their interest rates will be lower than those who have already taken out loans.
“This is for someone who has a job, but it doesn t pay enough and is struggling to make loan payments,” said Phyllis Furman of New York Daily News. “This will provide them with financial relief by reducing their loan payments to an affordable level.”
The measures of Obama’s new plan may sound insignificant, but some sort of help is better than none.