In the wake of President Obama’s announcement last week regarding new initiatives intended to ease the burden of student debt, the issue of rising student loan debt has gained significant attention in the national arena.
The plan proposed by Obama is a two-pronged expansion of an existing program, the Federal Family Education Loan Program.
One way Obama’s plan is intended to help debt-challenged college students is by accelerating a loan-repayment plan, originally approved by Congress in 2010, that is income based. The plan cuts student loan repayment to ten percent of discretionary annual income, down from the original 15 percent. Congress originally intended for the measure to go into effect in 2014. Obama has hastened the changes, announcing that he intends to institute the changes beginning in 2012.
The second way the measure is intended to assist in alleviating debt is by forgiving remaining student loan debt after 20 years instead of the original 25 years.
The new proposal, coined as the “Pay as You Go” plan, would allow students to cap their debt repayment beginning in January, potentially affecting as many as 1.6 million borrowers.
An approximate six million recent graduates will be able to consolidate certain federal loans under reduced interest rates, also beginning in Jan. Additionally, anyone who takes out a student loan next year will be eligible to cap loan repayments.
Tech students are not exempt from feeling the financial strain that is now common across many college campuses.
“[The Financial Aid Office is] experiencing an increase in office visits, phone calls and emails from students, often seeking assistance with completing the application process and/or addressing a change in their own or their family’s financial situation,” said Jennifer Mullins, Associate Director of Counseling and Outreach for the Financial Aid Office.
The number of students applying for aid has steadily risen in recent years.
“From the fall of 2008 to present we have seen an 18 percent increase [in applicants],” Mullins said.
Students have varying views on governmental and even Institute-level involvement in addressing the debt issue. The proposed forgiveness of student debt after 20 years is particularly contentious.
“I’m all for debt forgiveness. I think student debt ties young adults down and is an anchor on their futures,” said John Knoch, President of the College Democrats of Georgia and a fourth-year HTS major. “The costs of tuition have skyrocketed over the past generation, wildly beyond the level of inflation over the same period. While this is a systemic problem, I think that Tech could use more of substantial endowment to help out. With HOPE gutted, the Institute should go further to aid those who need the help.”
Obama’s debt forgiveness plan has not been popular among all students, however.
“While [student loan forgiveness] sounds like a fabulous idea, this will go to even further our financial crisis,” said Andrés Celedón, Chairman of the Tech College Republicans and a third-year PUBP major. “If we were to say that we no longer have to pay [our debts], the financial institutions that handed out the loans would soon go bankrupt and we could very well see another 2008 meltdown occurring.”
As the average cost of loans has steadily risen in recent years, the average number of students taking out those loans has risen proportionately. According to the College Board, approximately two-thirds of graduates with bachelor degress have student loans.
The Institute for Access and Success’s Project on Student Debt found that, while average debt is about $24,000, ten percent of undergraduates have loans of $40,000 or more. The problem is then exacerbated by the fact that unemployment rates are still extremely high.
“It’s certainly discouraging to know that there’s a relentless five-figure monster eagerly waiting to wreak havoc upon you once you graduate,” said Shyan Zarrabi, a second-year PUBP major.
The Office of Financial Aid offers financial counseling for students grappling with these complicated issues, and encourages students to seek assistance.
“If borrowing is necessary, we focus on how to borrow wisely,” Mullins said. “The most important guidance that we can give is options exist, but opportunities are often missed through procrastination.”