Obama reveals student loan changes
President Barack Obama announced upcoming changes to federal student loans Wednesday, which he said are intended to make it easier for students to pay loans off.
The changes include a reduction in the percentage of income students are required to pay toward students loans, reduction in the income ceiling from 15 to 10 percent and allowing students to consolidate government-related loans into a single lower-interest payment, Obama said.
He also said he wants to make outstanding loans forgivable after 20 years instead of 25 years, as it currently stands.
Steve Sharp, director of the USU Financial Aid Office, said the changes are designed to help students with loans stay out of financial trouble. In some cases, he said, 10 percent of a new graduate’s income won’t even cover interest payments, let alone principle.
“In the normal world, not being able to make interest payments would be considered default,” Sharp said. “But this is a government program, so it’s not necessarily a normal situation.”
Sharp said the changes won’t affect USU students as much than at other universities. The average student loan total at USU is less than $14,000, and only one fourth of students borrow money, he said.
“Of course that’s the average, so that hides a multitude of sins,” Sharp said. “Even here at Utah State a graduate student can borrow up to $100,000. It does happen but rarely.”
Tyson Hall, a senior dual majoring in political science and sociology, said he doesn’t have any loans right now, but he’ll need to get them for graduate school. While the changes will help, Hall said, he doesn’t approve of the president’s handling of the economy overall.
“What he’s doing right now is making it easier to pay off (a student loan), but I don’t have a job to pay it off with,” Hall said. “What I need is a good job, so that I can actually pay those off and contribute to the economy.”
Another student Caitlin Laughlin said she approves of Obama’s plan. A senior studying ecology, Laughlin said even though the cost of college at USU is relatively low, the U.S. needs an educated workforce, and the plan will help students nationwide.
“Money shouldn’t be totally prohibitive of a good education,” Laughlin said.
In his speech, Obama said the changes will bring some relief to Americans while Congress is deadlocked over his American Jobs Bill.
During his visit to USU Wednesday Sen. Orrin Hatch said he agrees with lowering interest rates for student loans, but he disagrees with the Occupy Wall Street protesters in New York City, who advocate complete forgiveness for all student debt.
“I think if you take a loan up, you ought to pay for it,” Hatch said. “We ought to make it so they can pay them back without having to give an arm and a leg to do it.”
Michael Lyons, associate professor in the political science department, said the timing of Obama’s speech was likely planned to help the president win re-election.
“This is smart politics on his part,” Lyons said. “He’s tried to get the Congress to enact job-creating legislation, and Congress has thrown up a brick wall of opposition — just flatly rejected everything — and he’s trying to keep political pressure up.”
Without the support of Congress Obama cannot pass any new laws, but when a law is written Congress sometimes gives power to the president to make small adjustments within the law’s framework, Lyons said. Out of the three changes to federal student loan rules, two of them are adjustments of existing legislation.
“These things don’t make a big difference in terms of stimulating the economy, but politically they demonstrate he’s trying his best,” Lyons said.
Through a summer lacking in positive economic news, Obama didn’t communicate effectively he was trying to make things better, Lyons said. Through changes similar to those announced in Denver, Obama might be seeking to convey the message that he is working to fix the economy while Republicans are blocking progress, Lyons said.
According to a statement from the Obama administration, borrowers will be able to reduce monthly payments beginning 2014. Obama’s new proposal will also allow about 6 million students to begin consolidating loans, according to the statement.
– steve.kent@aggiemail.usu.edu