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White House plan offers student loan reductions

Student loans have become the top cause of debt for Americans. Recently, that problem belonged to charge cards. To handle this craze, the White House announced a new initiative Wednesday to cut back that problem. The administration also plans other actions to deal with the economy without the approval of Congress. Resource for this article: Administration announces plan to ease student loan burden

‘Make a large difference’

The initiative was explained on Tues by Education Secretary Arne Duncan:

“These are real savings that will help graduates get started in their careers. These changes could make a big difference in the lives of current college students and recent graduates as they enter one of toughest job markets in recent memory.”

The initiative will allow consumers to merge both federally guaranteed student loans and direct loans into one monthly payment. Also, the initiative will cap student loan payments at 10 percent of discretionary income. It is a drop from the 15 percent that already existed. After 20 years, the loan can be forgiven. That was a 25 year term initially.

Not in 2014 anymore

Last year, the “Pay As You earn” policy was signed into law. With the program, it will accelerate with a start in January. The law was not supposed to be in effect until 2014 at first. The “We The People” forum on the White House site had a petition on it which started this move. Over 30,000 Americans signed the petition asking the White House to forgive student loans. The “We The People” part of the site is brand new. The government has not responded to any petitions but this one so far.

‘We can’t wait’

This can be a way for the government to keep away from Congress and address the down-turned economy. One White House statement said:

“The announcement is part of a series of executive actions to put Americans back to work and strengthen the economy, because we can’t wait for congressional Republicans to act.”

Republicans still do not want to help Obama out. They have the $447 billion American Jobs Act blocked still. Homeowners with enormous mortgage debt might also be able to get help from Obama in a plan he announced this week. He is also considering requiring community health centers to hire military veterans on.

Plan was not imagined all the way through

Not every student will benefit from the plan. It will only be available to those who have borrowed for the first time in 2008 or later. Further, to be eligible, borrowers also have to take out a new loan in 2012. Consumers in default won’t be helped at all in the initiative.

No cost to working class individuals

Melody Barnes is the Domestic Policy Council Director. She explained that working class individuals don’t have to worry about an extra load. The administration plans to cover the program by encouraging borrowers with both federally guaranteed loans and direct loans to merge both into the Direct Loan program. In the program, the federal government gets more interest. It gets the interest for everything. Those interested in the program can call 1-800-4FEDAID or go to www.studentaid.ed.gov.

Articles cited

New York Times Daily Finance Washington Post

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