Millions of young Americans are distressed over their job searches following their pricey educations. With over a trillion dollars of student loan debt, this population struggles to sustain themselves.Currently 71% of individuals attaining a bachelor’s degree are graduating with debt. This debt averages $294 hundred.
On Mon., Jun. 9, President Barack Obama had all eyes on him as he proposed expanding programs which reduce the issues of federal student loan borrowing. His announcement of new executive actions at the White House outlined actions could possibly save the average student $2 thousand in loans.
Obama’s “Pay As You Earn” (PAYE) program would widen the number of young student loan debtors who are eligible for monthly payments exceeding %10 of discretionary income. The remaining debt of these individuals would then be forgiven after 10 years for government workers and employees of some nonprofit organizations, and after 20 years for private sector workers.
A Fed study conducted earlier this year points out that more college graduates are working jobs which don’t even require a college degree and that, consequently, they are earning less. The average tuition at a public four-year college has more than tripled in the past 30 years. Meanwhile, an average family’s income has barely changed.
According to the Fed’s Household Debt and Credit Report in May, total U.S. student loan debt had increased by a whopping $31 billion in the first quarter. Surpassing $1 trillion for the first time. In addition, the Education Department estimated that the amount of debtors who joined the Income Based Repayment Plan in the first quarter increased by 24%, amounting to over 1.6 million.
The 5 year old Income-Based Repayment Plan stipulates that federal student loans may be modified annually depending on changes to income and family size. They are estimated at 15% of income following the payment of essential costs of living, known as discretionary income. Beginning in July, borrowers with financial hardship will be qualified for a monthly 10% repayment cap. Nevertheless, Obama’s plan would eliminate the financial hardship stipulation.
“Pay As You Earn” is Obama’s Student Loan Plan. Under the Public Service Loan Forgiveness program, federal student loan debtors who started their debt payments after Oct. 2007 and continued after Oct. 2011 will have the possibility of attaining some amount of debt forgiveness. Additionally, federal student loan debt could be repaid by civil service agencies as a recruitment and retention incentive.
The cost of the Pay As You Earn plan would be an estimated $7.2 billion throughout the span of 2015 to 2019 which resembles the specifics that were outlined in the White House’s 2015 budget proposal.
Obama has also planned to announce that he is directing renegotiations of contracts between the government and federal student loan services in order to make it easier for borrowers to circumvent defaulting on their loans. To promote awareness about tuition tax credits and flexible repayment options, Obama is instructing the Treasury and Education departments to work with major tax preparers which include companies such as H&R Block.
Throughout his presidency Obama has strived to make college more accessible to American citizens, making education a major priority. On Sat., Jun. 7, Obama declared on his weekly radio and Internet address, “At a time when college has never been more important it has also never been more expensive.”
On Tues., Jun. 10, the president will be able to answer questions concerning this plan via submissions on the Tumblr microblogging site. The Senate will debate the legislation next week, but this will certainly not be without drawbacks.
Photo: Jason Reed/Reuters