Steve Chiotakis: In a little more than an hour, President Obama will announce plans to speed up student loan reforms. Reforms that will start next year instead of in 2014. The plan includes the ability for low-income grads to cap student loan payments at 10 percent of discretionary income, and would allow the loan to be forgiven after 20 years, instead of 25.
Jeff Selingo is editorial director for the Chronicle of Higher Education. Hey Jeff.
Jeff Selingo: It’s good to be here.
Chiotakis: How much are these proposals going to help college grads?
Selingo: It’s going to help perhaps a couple million college grads, some of whom are in two different loan programs. And they’ll now have the ability to consolidate those loans at a lower interst rate. And then the other students it would impact — or the other graduates it would impact — are low-income borrowers, who can now pay a lower percentage of their discretionary income back in student loans.
Chiotakis: Is it going to be enough though, do you think?
Selingo: Over the long run, it still doesn’t get at the underlying issues with the cost of college. College prices continue to increase well above inflation; more and more students are having to take out loans and take out greater amounts of loans. So the fact that we’re going to still have graduates who are deep in debt — and if the economy doesn’t turn around — out of a job, that’s still going to be an issue next year, the year after, unless the economy turns around.
Chiotakis: Do you think anything has been tried like this before? I mean, we’ve had other plans — obviously, the federal government getting involved in student loans, right?
Selingo: Yes. The federal government got into the student loan business a couple of years ago. It threw those savings — that’s how they’re paying for a lot of these new programs. Some have suggested that the discretionary income — paying a part of your discretionary income to student loans — should be available to everyone, not just low-income borrowers. You should always pay based on your income.
That could be a possibility but it’s also a very expensive program. You have to remember that the students who pay back loans today, that’s the money that we’re using to give the students of tomorrow.
Chiotakis: Does this entice — do you think — more kids to go to school?
Selingo: I’m not quite sure it entices more students to go to school. It might entice more students to go to more expensive schools — knowing that if they take a low-paying job after graduation, that they might not have to pay as much back in student loans as they would have.
Chiotakis: Jeff Selingo from the Chronicle of Higher Education. Jeff, thanks.
Selingo: Thank you.
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