Seems that not only are graduated college students recognizing and feeling the burden of their student loans, but so it President Barack Obama. He recognizes that college students and recent graduates are facing rising tuition prices and burdensome student loan debt, therefore, Obama announced a plan that seeks to lessen the burden of paying back student loans.
Here are some questions and answers about student loans:
Q: How bis a problem is student loan debt?
A: The total outstanding student debt has passed $1 trillion, more than the nation's credit card debt, and average indebtedness for students is rising. The College Board said that the average in-state tuition and fees at four-year public colleges rose an additional $631 this fall, or about 8 percent, compared with a year ago. The cost of a full credit load has passed $8,000- an all time high. The board said about 56 percent of bachelor's degree recipients at public schools graduated with debt averaging $22,000. From private nonprofit universities, 65 percent graduated with debt averaging about $28,000. Experts say those average amounts usually are still manageable, at least for those who finish a degree. But they are concerned about the rate of increase, the growing numbers wit substantially more debt and the increase in those apparently in over their heads repaying them. The Education Department said in September that the national student loan default rate for the 2009 budget year had risen to 8.8 percent.
Q: What does Obama's plan do?
A: Obama will accelerate a law passed by Congress last year that lowers the maximum required payment on student loans from 15 percent of discretionary income annually to 10 percent for eligible borrowers. It goes into effect next year, instead of 2014. Also, the remaining debt would be forgiven after 20 years, instead of 25. The White House said about 1.6 million borrowers could be affected.
Obama also will allow borrowers who have a loan from the Federal Family Education Loan Program and a direct loan from the government to consolidate them at an interest rate of up to a half percentage point less. This could affect 5.8 million borrowers according to the White House.
Q: How much does it save borrowers?
A: Some borrowers will save several hundred dollars a month in payments
Q: What's the difference between government-backed student loans and private student loans? And, does Obama's plan impact private loan borrowers?
A: Before the law change, borrowers wanting a student loan backed by the government could get loans directly from the government or the Federal Family Education Loan Program. Those from the Federal Family Education Loan Program were issued by private lenders, but basically backed by the government. The law eliminated the private lenders' role as middlemen and made all such loans direct loans. The law was passed with the overhaul of the health care system with the anticipation that it would save about $60 billion over a decade. Private loans are when students typically get all they can get from the government. They're typically from banks, and they are where students tend to get into the most trouble because they don't have the same government protections and they usually have higher interest rates. Obama's plan won't help students stuck in those. The amount of private lending has fallen sharply in recent years as lenders have cut back and demanded higher credit scores. However, for extremely expensive colleges, students may hit the maximum federal borrowing limits and have no choice but to look for private loans.
Q: Are there other who don't benefit?
A: Borrowers already in default won't qualify. The accelerated component of the income-based repayment plan only applies to borrowers who take out a loan in 2012 or later and who also took out a loan sometime between 2008 and 2012, according to the Education Department. To be eligible for the consolidated loan component, a borrower must have both a direct loan from the government and a loan from the Federal Family Education Loan Program.
Q: The White House says the plan is free to taxpayers. How can that be?
A: A White House official says it doesn't cost taxpayers anything because when the loans are consolidated, the government no longer has to pay a subsidy to private lenders on the Federal Family Education Loan Program loans.
Maureen Evans Arthur, 24, Undergraduate, Howard Community College has $26,000 student loan debt so far "A college degree is practically a necessity to navigate this economy, but is it worth the debt? I believe so, but I also think students should explore their options. Community colleges are an excellent way to kick start your education at the fraction of the costs of a four year institution."
Marisa Cohen, Graduate Student at UCLA has $65,000 plus in student loan debt. "I made the decision to go back to school before the economic downturn. Now I am graduating in a few months with a lot of debt and not a lot of job prospects. It scares me to think I will be carrying this number around with me for the rest of my life."
Brian Lawless, 24, Undergraduate at UCLA has $40,000 student loan debt even with financial aid. "I received financial aid and grants, yet those weren't enough and I still owe $40k. Without the loans, I wouldn't have a degree. It's a Catch-22- a degree is almost a must nowadays, but then you graduate and can't pay the loans back. It sucks."
Ifreke Williams, 27, Medical Student, Virginia Common Wealth University School of Medicine has $226,000 in student loan debt now by the time she graduates she will owe $295,000 and that is before the 7-8 percent interest. "The thought of starting life with huge debt is very frightening, especially since I plan on going into primary care and not some high-paying lucrative medical speciality or sub speciality."
There are countless college graduates who have thousands and thousands of dollars of student loan debt and no jobs to help them repay them. The choice to go to college is normally applauded, but no student at the time thinks of the challenges of money, job hunting and economic crisis until they are already getting their diploma and walking into the real world. What are your thoughts on student loan debts and the plan that Obama has stressed for the year 2012? Do you still have student loans as a professional?