President Barack Obama’s plan for more flexible student loan repayment options is earning praise from many education advocates—and those watching the Occupy Wall Street protests—while conservatives are labeling it as another policy that encourages colleges to raise tuition.
The plan, unveiled in late October, would allow future borrowers to limit repayments to no more than 10 percent of their discretionary income. As a result, supporters say new graduates will get some relief if they have difficulty finding work in the struggling U.S. job market.
“These are meaningful steps that will benefit millions of loan borrowers,” said Pauline Abernathy, vice president of The Institute for College Access and Success, or TICAS.
Most students at four-year colleges are taking out loans to pay tuition, and college seniors graduated in 2009 with an average debt of $24,000, according to the institute.
The Obama plan would make income-based repayment, or IBR, more generous to students who select this option. Under current law, those in IBR pay 15 percent of their discretionary income, with any remaining loan balance canceled after 25 years. In addition to lowering the payment threshold to 10 percent, the new plan, called Pay as You Earn, would cancel any remaining balance after 20 years.
The Education Department says graduates earning $40,000 to $50,000 a year could reduce loan payments by more than 60 percent under the plan, depending on the size of their debts.
The new initiative also may pay some political dividends for the White House, as many youths in the Occupy Wall Street protests have identified student loan debt as a significant problem. Those who left comments at the Occupy Wall Street website listed forgiveness of student loan debt among proposed demands, while some of those profiled at the wearethe99percent.com website cited high levels of student debt as one reason for their involvement.
