For the 36 million Americans with student loan debt, the White House revealed that they are taking steps to lighten the load.
"College graduates are entering one of the toughest job markets in recent memory, and we have a way to help them save money by consolidating their debt and capping their loan payments." Screenshot via the U.S. Department of Education
The plan, to be unveiled in Denver on Wednesday, is to cap student loan payments at 10 percent of discretionary income and bring the loan forgiveness law down to 20 years, versus 25. Obama aims to push up the start date from 2014 to 2012.
In a statement, the president acknowledged, “Steps like these won’t take the place of the bold action we need from Congress to boost our economy and create jobs, but they will make a difference.”
Starting in January of 2012, those who take advantage of the cap will also qualify for a 0.5 percent cut on the interest rate on some loans, which will also aid in lowering the payment and can save them money in the long run.
According to the Fed, student loan debt surpasses credit card debt in this country. Reuters reports that this year total loans outstanding are expected to top $1 trillion.
And defaults are up as well. According to the U.S Department of Education, of the 3 million student borrowers who entered repayment in 2009, over 300,000 of them defaulted by the end of 2010.
One student told the New York Post, “It makes me cringe when I hear politicians say we need people to go to college. Why? So you can accrue $50,000 in debt and get a job that pays $8 an hour? I’m going to die with this debt.”
There has been a push in recent months to forgive all student loans, in order to stimulate the economy. Advocates include MoveOn.org, Jessie Jackson and Roseanne Barr. It has also been a hot button issue for the Occupy Wall Street movement.
President Obama states, “In a global economy, putting a college education within reach for every American has never been more important. But it’s also never been more expensive.”
The “Pay as you Earn” plan does not require approval by the House or Senate.
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