Obama Unveils New Student Loan Rules
MELISSA BLOCK, HOST:
Today, President Obama announced a plan to help college graduates who are struggling to pay back their federal student loans. He proposed a more aggressive version of a plan that bases borrower's monthly payments on their income. That's something he pushed through Congress in 2009.
But as NPR's Claudio Sanchez reports, many graduates say even the new plan doesn't go far enough.
CLAUDIO SANCHEZ, BYLINE: Under President Obama's plan, students' monthly payments on their government-backed loans would be capped at 10 percent of their discretionary income.
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PRESIDENT BARACK OBAMA: Because of this change, about 1.6 million Americans could see their payments go down by hundreds of dollars a month. And that includes some of the students who are here today.
SANCHEZ: And if 20 years down the road you still haven't finished paying back the money you borrowed, the federal government will forgive the balance. Also, beginning next January, students and college graduates will be able to consolidate their loans at much lower interest rates.
Student at the University of Colorado at Denver, cheered, of course. But Anthony Dela Rosa(ph), 22, is less than thrilled. He graduated last May from the University of Colorado with a degree in international affairs and political science. In a few days, he has to start paying back over $50,000 he borrowed for school.
ANTHONY DELA ROSA: So, my monthly payments are going to be a four to 500.
SANCHEZ: That's four to $500 a month, which is not going to come down very much, says Dela Rosa, because like so many recent graduates these days, over half of the $50,000 he borrowed is in private loans, not subsidized by the government. President Obama's pay as you earn plan does not cover private loans, only federal government loans. And that, says Dela Rosa, still leaves him in a bind.
ROSA: The wiggle room isn't much for students and there are a lot of students who are, in my case, that have the combination of those private and federal loans. And those students are struggling to get by even if they have a job. And if they don't, those payments are pretty high and the interest rates on those private loans are ridiculous.
SANCHEZ: Administration officials concede the plan won't solve every students' debt problem, but it's a start. And they say it won't cost the federal government a dime, because it's no longer paying banks billions of dollars in subsidies to issue college loans.
JAMIE MERISOTIS: We are very encouraged by the president's proposal. But certainly this initiative alone won't solve the challenges that we have, in terms of increasing affordability for higher education.
SANCHEZ: Jamie Merisotis of the Lumina Foundation says, over 30 million Americans still haven't finished paying back their student loans. In fact, student loan debt is now greater than credit card debt. With college tuition and fees climbing faster than inflation, faster than wages and family income, students and parents' reliance on loans is growing, too. Already, about three-fourths of all the aids students get from the federal government is in loans. And that's the problem, says Merisotis.
MERISOTIS: So, the cap on payments and the efforts to provide discount on consolidated loans are all steps in the right direction. But over time, the more students borrow, the costlier it's going to be for the federal government and for us, as a society.
SANCHEZ: In Denver, the president said he'll do whatever it takes to help more Americans attend college.
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OBAMA: Because no matter how tough times are, no matter how many obstacles stand in our way, we are going to make the dream that all Americans share real once again - and that starts right now. It starts with you.
SANCHEZ: Still, experts argue, without fundamental changes in the pricing of college education and a more affordable source of government aid to pay for it, more Americans will be priced out of a college education.
Claudio Sanchez, NPR News.
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