Obama Announces Help For Student Loan Borrowers

DENVER -- President Barack Obama recalled his struggles with student loan debt as he unveiled a plan Wednesday that could give millions of young people some relief on their payments. Speaking at the University of Colorado Denver, Obama said that he and his wife, Michelle, together owed more than $120,000 in law school debt that took nearly a decade to pay off. He said that sometimes he'd have to make monthly payments to multiple lenders, and the debt meant they were not only paying for their own degrees but saving for their daughters' college funds simultaneously.

"I've been in your shoes. We did not come from a wealthy family," Obama said to cheers.

Obama said it's never been more important to get a college education, but it's also never been more expensive. Obama said his plan will help not just individuals, but the nation, because graduates will have more money to spend on things like buying homes.

"Our economy needs it right now and your future could use a boost right now," Obama said.

Obama's plan will accelerate a measure passed by Congress that reduces the maximum required payment on student loans from 15 percent of discretionary income annually to 10 percent. He will put it into effect in 2012, instead of 2014. In addition, the White House says the remaining debt would be forgiven after 20 years, instead of 25. About 1.6 million borrowers could be affected.

He will also allow borrowers who have a loan from the Federal Family Education Loan Program and a direct loan from the government to consolidate them into one. The consolidated loan would carry an interest rate of up to a half percentage point less than before. This could affect 5.8 million borrowers.

Student loans are the No. 2 source of household debt. The president's announcement came on the same day as a new report on tuition costs from the College Board. It showed that average in-state tuition and fees at four-year public colleges rose $631 this fall, or 8.3 percent, compared with a year ago. Nationally, the cost of a full credit load has passed $8,000, an all-time high.

Student loan debt is a common concern voiced by Occupy Wall Street protesters. Obama's plan could help him shore up re-election support among young voters, an important voting bloc in his 2008 election. But, it might not ease all their fears.

Anna Van Pelt, 24, a graduate student in public health at the University of Colorado Denver who attended the speech, estimates she'll graduate with $40,000 in loans. She called Obama's plan a "really big deal" for her, but said she still worries about how she'll make the payments.

"By the time I graduate, my interest rate is going to be astronomical, especially when you don't have a job," Van Pelt said. "So it's not just paying the loans back. It's paying the loans back without a job."

The White House said the changes will carry no additional costs to taxpayers.

Last year, Congress passed a law that lowered the repayment cap and moved student loans to direct lending by eliminating banks as the middlemen. Before that, borrowers could get loans directly from the government or from the Federal Family Education Loan Program; the latter were issued by private lenders but basically insured by the government. The law was passed along with the health care overhaul with the anticipation that it could save about $60 billion over a decade.

The change in the law was opposed by many Republicans. At a hearing Tuesday, Rep. Virginia Foxx, R-N.C., who chairs a subcommittee with oversight over higher education, said it had resulted in poorer customer service for borrowers. And Senate Republicans issued a news release with a compilation of headlines that showed thousands of workers in student lending, including those from Sallie Mae Inc., had been laid off because of the change.

Today, there are 23 million borrowers with $490 billion in loans under the Federal Family Education Loan Program. Last year, the Education Department made $102.2 billion in direct loans to 11.5 million recipients.

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  • by Anonymous Location: ENC on Oct 27, 2011 at 11:20 AM
    I am so sick and tired of hearing about Nobama wanting others to foot the bills of people that can't afford to take on projects they KNOW they can't afford!!! Everybody can't attend these big universities......get real. If your parents didn't plan and save for you to go to college, then you need to consider a technical college or nothing. This mess has got to STOP! Nobody will have anything left but "change" by the time this so-called president is out of office. People, PLEASE vote sensibly in 2012!!!!
  • by Eloise Location: Washington on Oct 27, 2011 at 06:56 AM
    From another commenter here - Take this example: If Rhonda college student gets into College or University and borrows from the government the requisite $212,000 to obtain an undergraduate degree, her repayment schedule will be based on what she earns. If Rhonda opts to heed the president’s call for public service, and takes a job as a city social worker earning $25,000, her payments would be limited to $1,411 a year after the $10,890 of poverty-level income is subtracted from her total exposure. " Twenty years at that rate would have ' taxpayers recoup only ' $28,220 of their $212,000 loan to Rhonda
  • by What? Location: enc on Oct 27, 2011 at 06:40 AM
    There is not reason to be against setting payments at a reasonable amount. How many of you pay 10% of your salary on any payment other than your house? Yet, you think that isn't enough to charge these students? You think 20 years isn't long enough to pay on these loans? This is the most anti-education attitude I have ever seen! Do the math-compute how much money would be paid back at 10% of their salaries for 20 years! Then compute how much of that is interest-and that isn't enough? Yet, the GOP wants corporations to pay just 5% to bring back money they have taken out of the country? What is wrong with you people?
    • reply
      by Dad of a Grad on Oct 27, 2011 at 07:54 AM in reply to What?
      How about those of us who worked and saved for our child to go to school so they could start their life without at debt. My child has finished undergrad and now graduate school for which she does not owe anyone a dime because my family was responsible enough to save and plan ahead. So now you are advocating that I not only pay for my child but also your child who takes loans and does not fully pay them back. The only way I'd agree with this is if the bill would reimburse me 25% of the money I paid UP FRONT for my child to go to school. I'm so tired of having to pay my part and your part too. If you borrow it, you must pay it back IN FULL.
    • reply
      by Obama Snake Oil co on Oct 27, 2011 at 04:44 PM in reply to What?
      If your kids are not smart enough to work their way though college? Ever think they should be there? I worked my way and made it on my own without government help. Ever heard of that? So you saying you didn't take care of them so I should? I am with Dad of Grad...either you put the money away or suffer the consequences...Its not my problem...its yours! Your kids are not my problem, own up, man up and do what you should do as a real man. Or help you kid get through it as much as you can, waive the new house and cars for the sake of your kids and be a man for the first time in your life. Corporate money? They owe you nothing you don't work for. Just accept the fact your kid will spend his life sweeping the floor in Wallyworld!
  • by Donna on Oct 27, 2011 at 04:27 AM
    You know, when I first looked at this I was saying "Wow! Finally our president has a great idea." But then I started to really think about it. Who will end up paying the "unpaid" or "forgiven" loans? Yep, that's right. Taxpayers will foot the bill. The money has to come from somewhere. Yes it will be years up the road but that does not change the fact that the forgiven loan balances must be repaid somehow. So tax increases would be the word of the day in due time. It may not affect me but my children and grandchildren would definitely be footing the bill. To me, it's like when someone goes in a store and shoplifts. They may have gotten the goods for nothing but the store passes the losses on to consumers in the form of higher prices. They must recoup their losses somehow in order to stay in business. This student loan plan has the same potential.
    • reply
      by To Donna on Oct 27, 2011 at 06:36 AM in reply to Donna
      That is bull! If college graduates pay 10% of their salaries for 20 years, do you really think there will be many who do not pay off their loans? You haven't even considered that the "amount" includes interest! They will probably repay the amount they borrowed in the first 15 years!
      • reply
        by Donna on Oct 27, 2011 at 06:49 AM in reply to To Donna
        Do some research before disagreeing next time. I did. Take a look at the real #'s instead of the "Obama" #'s.
      • reply
        by Obama Snake Oil Co on Oct 27, 2011 at 06:51 AM in reply to To Donna
        Donna is correct, you posted the bull part. You have no ideal what you even posted to post anything intelligent about it. She is right, this program lays the debt on your kids to pay among the trillions in debt we already have to pay back. Sounds pretty "here now" kids posting on their mothers computer again. No back will loan to students that can drag a loan out past the date so you either killed their chances of getting on or the federal program will make it so hard to get into. Nice try sparky.
      • reply
        by Frank on Oct 27, 2011 at 07:01 AM in reply to To Donna
        To - To Donna on Oct 27, 2011 at 09:36 AM. Nice fiction story $1 Trillion estimated amount of student loan debt owed by Americans.
  • by Scott Location: Washington on Oct 27, 2011 at 04:22 AM
    Just another I want to buy your vote......look at what I have done to help you....
  • by George Location: Greenville on Oct 26, 2011 at 05:00 PM
    Just more political BS from Obummer. This guy is bad news for Americans.
  • by Mike Location: Onslow on Oct 26, 2011 at 04:30 PM
    At graduation ceremonies across America. We tune into one of the many commencement services. Kids as of this day your Alma Mater we have automatically enrolled you, for automatic extended "unemployment benfits". We also recommend you establish your new life in North Carolina and vote Democratic!
  • by Anonymous on Oct 26, 2011 at 04:27 PM
    Jobs,healthcare,student debt,bin laden,troops coming home, he gets my vote 100%. now if only the republicans would help him pass something we'd be in good shape. but wait, that might get him re elected, so they will not help improve our country. What has the Republicans done for me?.......nothing.
  • by Do What on Oct 26, 2011 at 04:25 PM
    Open your brain cells education is a trap to keep a person enslaved to debt.I took 6 wks of so-called online classes.When I contacted the instructor about help with a lesson,she told me to contact customer service.Long story short i withdrew and am now stuck with a $4800 loan.And I got not one cent of this loan money.It's all a fraud!!!
  • by Obama Snake Oil Co Location: Washington on Oct 26, 2011 at 03:54 PM
    Wow, if I don't make my mortgage payment after 20 years, can I still keep the house? Just another campaign cause...from the master of lies and deception. Geez, just imagine how the repulicans will have to clean up this mess. It will be like the dog eating a dead possum...someone is going to throw up.
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