Continuing his recent tack of bypassing Congress and acting “without them,” President Obama on Wednesday announced a package of student loan reforms designed to lower college graduates´ monthly payments, arguing his plan will redirect some of that borrowed money into the economy to promote job growth.
Speaking to a friendly audience of college students in Denver, Mr. Obama said the changes “won´t cost taxpayers a dime but will save you money and will save you time,” and tied the ever-rising cost of education to the nation´s lagging economy.
“Living with that kind of debt means making some pretty tough choices. It might mean putting off buying a house. It may mean you’ve got to wait longer to start a family,” he told the crowd, which erupted with cheers when the president spoke of moving ahead without waiting for Congress to act.
Republicans wasted no time blasting both the plan and the president’s method of making policy changes without the approval of either the House or the Senate.
“The president has made no effort to work with Congress to find any bipartisan solutions on the student loan debt issue,” said Sen. Michael B. Enzi, Wyoming Republican and his party’s ranking member on the Senate Health, Education, Labor and Pensions Committee, which traditionally has played an integral role in any changes to the student loan system.
Under the president’s proposal, college graduates will be able to consolidate direct government loans and government-backed private loans into one monthly payment at a lower interest rate.
Beginning for students in school next year, monthly payments after the end of college will be limited to 10 percent of the student’s discretionary income, and all loans will be forgiven after 20 years. That program was scheduled to take effect in 2014, but the administration has decided to bump up the starting date.
The move came just a day after a new report put the average cost of a four-year college education at a state university at more than $17,000 a year, an all-time high, when room and board are included. In-state tuition at public universities jumped more than 8 percent over last year, according to the annual College Board survey of higher education costs.
The average college student now graduates owing about $24,000, and the nation´s total college loan debt now tops $1 trillion and has surpassed total credit-card debt for the first time in history.
Such high costs will likely make Mr. Obama’s plan popular among college students and recent graduates, many of whom remain shackled by debt and unable to find jobs.
But some education specialists think the administration may go even further. Richard Vedder, director of the nonprofit Center for College Affordability and Productivity, said Wednesday’s action could be a step toward total forgiveness of all student loan debt, an unprecedented action that would throw financial markets into chaos.
“That would be a disastrous move,” Mr. Vedder said. “The president’s idea just isn’t very good. I don’t know what the rationale is, other than political rationale. I don’t see it as a boost to the economy, and I don’t think it’s a help to higher education in the United States.”
Some economists believe the effort could inject more money into the economy in the short term, since less of a graduate’s monthly income will be claimed by lenders. But in the long term, Mr. Vedder said, the move could backfire by causing private lenders to raise interest rates on other loans they make or simply “scare them off” entirely.
The Education Finance Council, which represents a coalition of student finance organizations, also blasted the plan, arguing that it “does not address the real student loan problem: rising tuition and the lack of well-paying jobs.”View Entire Story
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Ben Wolfgang is a national reporter for The Washington Times. Before coming to the Times, he spent four years as a political reporter in Pennsylvania. His focus is on education and science policy. Ben lives in southeast D.C. and has played guitar in several bands while still in Pennsylvania. He can be reached at firstname.lastname@example.org.
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