Obama's student loan debt-relief plan: Too good to be true?

• BobYoMeowMeow wrote on 2011-10-26 15:55

  President Obama on Wednesday is launching a new plan to lower the cost of paying back student loans for millions of borrowers – the latest installment in his bid to move a jobs agenda that bypasses a gridlocked Congress.
  At nearly $1 trillion, federal and private student loans now exceed US credit-card debt, posing a formidable repayment burden for many borrowers at a time of near-double digit unemployment.
  The plan, to be implemented by executive authority alone, allows some 1.6 million students to cap their loan payments at 10 percent of their discretionary income starting in 2012. It also forgives the balance of student loans after 20 years of payments. Current law allows students to limit loan payments to 15 percent of income, forgiving debt after 25 years of payments, though few students are aware of this option
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  In a related move, the US Department of Education, which now administers all federal education loans, is giving borrowers the option of consolidating federal and private loans at reduced rates.
  “College graduates are entering one of the toughest job markets in recent memory, and we have a way to help them save money by consolidating their debt and capping their loan payments,” said Education Secretary Arne Duncan on a conference call with reporters on Tuesday. “And we can do it at no cost to the taxpayer.”
  Even before the official rollout of the program at a rally in Denver, House Republicans challenged how the president could move forward without congressional approval.
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  "The president is about to announce a major change in the program that we have not yet acted on in the Congress,” said Rep. Virginia Foxx (R) of North Carolina, who chaired an oversight hearing on Tuesday. “What authority does the department have?”
  “I can’t answer that question,” said witness James Runcie, the Education Department’s federal student aid chief operating officer. “Whatever we’re told to do in terms of implementation and execution, we’ll optimize and do what’s in the best interest of borrowers and students.”
  Part of the answer appears to be a move made by the Democrat-controlled Congress in March 2010. It ended taxpayer subsidies to private banks for student loans, meaning that the Education Department alone was responsible for handing out government money for such loans. That means the $60 billion set to go to private banks for student loans during the next 10 years is now tabbed for the Education Department.
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  Congress directed the Education Department to use that savings to expand Pell grants for low-and moderate income students to attend college. But many House Republicans who still oppose the move they say it has made the Department of Education one of the largest banks in the nation, largely unaccountable to Congress.
  “This is another example of the Obama administration making changes to federal education policy behind closed doors,” said GOP committee spokeswoman Alexandra Sollberger in an e-mail. “We are disappointed that the Department of Education chose not to engage committee members prior to announcing this plan to the press.”
  Republican critics also note that the Education Department charges 6.8 percent for loans that cost much less, “creating a pretty big slush fund for the government,” said Rep. John Kline (R) of Minnesota, who chairs the House Education and Workforce Committee, at Tuesday’s hearing.
  He tabbed federal borrowing for the program “at less than 1 percent” – yielding a large profit.
  Education Department officials dispute that view. “Right now Direct Loans reduce the deficit,” says Education Department spokeswoman Jane Glickman. “I wouldn’t call it slush.”
  The 10-year interest rate is dictated to the department by the White House's Office of Management and Budget (OMB), added Ms. Glickman in an e-mail. “In yesterday’s market, the 10-year rate was between 2 and 2.5. In the OMB projections, it is more like 3 for 2011.
  The burden of some $1 trillion in outstanding student loans – up from $500 billion just five years ago – is a hot issue in the Occupy Wall Street protests. Students struggling with loans they can’t afford to repay blame the federal government for stripping away consumer protections
  “Every fundamental consumer protection has been specifically removed by our Congress for student loans,” says Alan Collinge at the Zuccotti Park protest site in New York on Sunday.
  “It’s led to horrible outcomes for the borrowers,” he adds. “The political will to crack down doesn’t exist.”
  President Obama said in a statement on Tuesday: “Steps like these won’t take the place of the bold action we need from Congress to boost our economy and create jobs, but they will make a difference."
  Unlike mortgage or credit-card debt, student loans can’t be eliminated through bankruptcy proceedings. With a sputtering economy, the investment in college doesn’t always pay off for students. In an interview on NBC’s “Meet the Press" on Sunday, GOP presidential hopeful Ron Paul called federal student loans a “failed program,” because it enabled colleges and universities to inflate costs.

  
  
  http://news.yahoo.com/obamas-student-loan-debt-relief-plan-too-good-234242818.html
  
  even though it benefits education
  the cat disagrees
  the students have to pay off themselves
• Kayate wrote on 2011-10-26 15:57
  Yea but some students just can't find a job.
• Zid wrote on 2011-10-26 16:15
  It's just a small hand in helping, nonetheless. 1/5th years off until that debt is gone is really a good relief.
  
  But so many people wanting to go to college and pulling out so much money in grants and loans. Is it sad that the depression makes people want money, and thus college seems like a better choice, even though that's throwing more money down with lower chances of success?
• Kayate wrote on 2011-10-26 16:17

  Quote from Zid;636052:

  It's just a small hand in helping, nonetheless. 1/5th years off until that debt is gone is really a good relief.
  
  But so many people wanting to go to college and pulling out so much money in grants and loans. Is it sad that the depression makes people want money, and thus college seems like a better choice, even though that's throwing more money down with lower chances of success?

  
  
  That can be true but some students just don't know when to stop and go crazy with the loans on of my teachers did that and she is still paying them off she's close to her 40's too.
• TA wrote on 2011-10-26 16:30
  Nice!
• Cynic wrote on 2011-10-26 16:54
  Even though he's ignoring some of the main and bigger issues, I'm glad he's still making good choices otherwise.
• Chiyuri wrote on 2011-10-26 17:31
  I never really understood why education is so costy in the USA.
  
  College over here in quebec, you barely have to pay 250$ for each session (which last half a year). Most programs last 2 years, some more technical programs last 3 years. so around 1000$ to 1500$ in total.
• TA wrote on 2011-10-26 17:42

  Quote from BobYoMeowMeow;636034:

  even though it benefits education
  the cat disagrees
  the students have to pay off themselves

  
  
  You'd be singing a different tune if you had $40,000-80,000 in loans and they wanted 30-60% of your income.
• Yoorah wrote on 2011-10-26 18:52
  This plan is pretty dumb. Making loans easier only encourages more people to get in debt, making the problem worse. It's like feeding a fat kid with more hamburgers, with taxpayer dollars. :v Students need to be more careful with debt and opt for cheaper education, especially if they plan on majoring in something useless (like many do) anyway. Or, you know, don't major in something useless just for the sake of saying you went to college. I won't even mention how many students abuse student loans to buy stuff they don't need...
  
  

  Quote from TA;636120:

  You'd be singing a different tune if you had $40,000-80,000 in loans and they wanted 30-60% of your income.

  
  lol
  
  

  The plan, to be implemented by executive authority alone, allows some 1.6 million students to cap their loan payments at 10 percent of their discretionary income starting in 2012. It also forgives the balance of student loans after 20 years of payments. Current law allows students to limit loan payments to 15 percent of income, forgiving debt after 25 years of payments, though few students are aware of this option

  
  That seems like the bigger problem here. >_>
  
  I like Obama, but this is pretty clearly a populist move for his re-election campaign more than anything else.
• Claudia wrote on 2011-10-27 00:57
  Even 'cheaper' education is really expensive, though; i'm looking at UMass Dartmouth, and that's $21k/yr, and that's for MA residents (so we save almost 30%). So with scholarships and money we have saved away, i'll need loans to get through college like most anybody else. I had this big dream that every kid has, about going to Harvard or some Ivy League, but it's ridiculous to even imagine it because it's just so impractical.
  
  I think what he's doing is right, and fair, overall.
• Yoorah wrote on 2011-10-27 01:13
  The problem is that those same "right and fair" actions are partly responsible for the soaring costs of education in the first place. :(
• Claudia wrote on 2011-10-27 01:16
  probably ):
  But at least...taking steps to fix it, that isn't so bad.
• Juno wrote on 2011-10-27 01:38
  This helps the people who made their calculations before the economic crash, but what we really need is to drastically reduce the cost of higher education.
  
  A good move, but only if it's part of a set.
• TA wrote on 2011-10-27 01:42
  The problem is that they don't take that % of your actual income. They take it from your projected income of what they think you should make in your profession, and some of their estimates are just ridiculous.
• Sayoko wrote on 2011-10-27 01:45
  The problem with student loans is that the government is giving too much loans out in the first place. Thus, colleges aren't afraid to raise their tutiton faster than the rate of inflation each year. If the government started cutting down on the amount of loans they give, people will be less able to afford for college, and will start choosing only the cheaper state colleges/community colleges. Then those 40 k a year private schools will have no choice but to cut down their tuitions to reasonable amounts.
  
  What pisses me off is that much of the school's spending isn't helping with the quality of education as it is trying to attract more students. Spending 170 million dollars on an art museum that few people will go to? Sure art is nice to look at, but REALLY? Times are tough, and they should work on more prioritizing issues such as how to better equips students with a job rather encourage people to major in useless degrees and majoring in ART HISTORY/PHILOSOPHY with all the new facilities for them.
  
  How about using that 170 mil dollars to serve as scholarships for the students that really need it!