The White House announced on Tuesday two new measures the Department of Education will start offering in January to help college graduates climb out of their student loan debt hole.
One of the proposals would push up the start date for more favorable terms on a special loan repayment program based on income, said White House domestic policy adviser Melody Barnes. Another measure would encourage graduates with two or more different kinds of federal loans to consolidate them and get a small break on interest rates.
Obama is expected to trumpet them when he appears Wednesday at the University of Colorado’s Denver campus.
“We’re using executive authority. . .stepping into a gap, at no cost to the taxpayer, creating a program that creates additional relief to the students,” Barnes said.
The president is under pressure to address the financial concerns faced by students and recent graduates. Student loan debt, which is now outpacing credit card debt, is one of the problems called out at Occupy Wall Street demonstrations in New York.
Average student loan debt for the graduating class of 2009 at four-year nonprofit colleges was $24,000, including all private and federal loans, according to the Institute for College Access & Success.
In 2010, the unemployment rate for college graduates age 24 and younger rose to 9.4%, the highest since the Labor Department began keeping records in 1985.
However, the White House announcement doesn’t offer much new help for existing borrowers who are already eligible for the income-based repayment plan and who have been able to consolidate federal loans for more than a year, said Mark Kantrowitz, publisher of FinAid.org.
“It preserves the cost of the loans,” Kantrowitz said. “And existing borrowers who are up to their eyebrows in debt, they don’t get the benefit” of the lower payments on the income-based repayment plan.
Ooops. Sucks for us old heads…
One of the Obama proposals would advance the start date for a special loan repayment program based on income that aims to help struggling graduates.
The Income-Based Repayment Plan is not well-known, higher education experts say.
The way it works now is that graduates who enroll get charged 15% of their monthly discretionary income to pay off loans, with debt forgiven after 25 years.
Congress passed a law set to go into effect in 2014 that would drop the monthly payment for loans originated that year to 10% of discretionary income and would forgive all debt after 20 years.
The Obama administration would improve on the law by fast-forwarding the new terms to take effect in 2012 on loans originated that year, Barnes said.
Eh. At least the youngins have a slightly less grim financial future to look forward to.