During a conference call Wednesday, White House education representatives spoke about the Obama administration’s new efforts to help student loan borrowers manage their debt.
The Daily Lobo talked to U.S. Secretary of Education Arne Duncan, Director of the White House Domestic Policy Council Melody Barnes and Special Advisor to the Secretary of the Treasury on the Consumer Financial Protection Bureau Raj Date about a new proposal from the Department of Education.
Duncan said the proposal will contribute billions in loan restructuring for students to help them secure jobs.
“Young people today are struggling,” he said. “They are struggling to find a good job and they are struggling to find a job at all.
We are increasing Pell grants and funding students by $40 billion over the next decade.”
Duncan said funding would come from redirecting bank subsidies toward student loan funding, and would not require additional taxes.
Barnes said a “pay as you earn” plan will help Americans manage student loan debt by capping monthly payments at what each individual can afford: 10 percent of the individual’s monthly income.
“Ensuring that every student has access to a quality, affordable education has been a priority for the president,” she said. “While college is an excellent investment, (the president) also knows that those costs are high. Some may be discouraged from entering education or other lower paying jobs because of loan debt.”
A similar bill passed by Congress lowering the repayment cap from 15 to 10 percent is scheduled to go into effect in 2014, but the current proposal will accelerate the change to 2012. Additionally, students would be forgiven remaining debt after 20 years, rather than 25. Barnes said the plan would help about 1.5 million borrowers. She said the conference call was an effort to reach more students about the new plans.
“Three hundred and sixty million borrowers are out there, only 450,000 are taking advantage of the current plan, which caps payments at 15 percent,” she said. “We are really hoping that as we have this conversation with the nation … people will take advantage of this.”
The Daily Lobo asked if the Department of Education considered tying federal loan amounts to predicted student success by degree, or creating student loan incentives to funnel students into the most hirable jobs in a struggling economy.
According to a list compiled by Time magazine, those who enter career fields including counseling, psychology and early childhood education are much less likely to secure jobs, high-salary jobs especially. This could mean borrowers from those degrees would be unable to repay loans, while those in high-demand fields such as engineering would be able to repay loans much more quickly, and fill some of the most needed high-tech positions.
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“We have not tied incentives to more hirable jobs,” Duncan said.
“What we are trying to do is make these payments contingent upon how much you are making, and so where folks are in a very lucrative profession, they will pay more on absolute basis, not on a relative basis. Folks that are doing great work in a less profitable position … will pay less (monthly).”
Duncan said consolidating existing loans from multiple agencies will help remove confusion when paying bills. The plan would consolidate $400 billion in Federal Family Education Loans with newer Direct Loans in one bill this January.
“We are consolidating this all into one bill, making it easier to understand,” he said. “Without multiple bills, students are less likely to default.”
Date said a third goal of the proposal is to provide consumers with better information about college loans. The administration created the “Know Before You Owe” financial aid shopping sheet, which will allow students to view the costs and risks of student loans and various financial aid packages from multiple universities before making decisions.
“We believe student lending should be about making life better, not making life worse,” he said. “Right now the financial aid process is complex and confusing, and it’s confusing in three different ways: One, financial aid letters are full of jargon, it’s hard for students to compare offers from different schools; Two, the award letters don’t explain the different types of financial aid …; Three, students can’t easily determine how much debt they are taking on, and how much debt is too much debt.”
Prior to the conference call, President Barack Obama spoke to students Wednesday about his plan to lower student loan debt at the University of Colorado in Denver.
“I’ve been in your shoes; we did not come from a wealthy family,” Obama said during the speech.
The president said he and the First Lady paid off nearly $120,000 in debt incurred from student loans.
Give feedback on the “Know before you Owe” financial aid shopping sheet consumerfinance.gov/students/knowbeforeyouowe
