President Obama’s plan to shake up the student loan system
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Steve Chiotakis: In a couple of hours, President Obama will
announce plans to speed up student loan reforms which the White House says will save borrowers hundreds of dollars per month.
Marketplace’s Nancy Marshall-Genzer is with us live from Washington with the latest on that story. Hey Nancy.
Nancy Marshall-Genzer: Hey, good morning Steve.
Chiotakis: What do we know about how this is gonna work?
Marshall-Genzer: The administration is speeding up changes to what it calls its “pay as you earn program.” Starting next year, low-income graduates will be able to cap their student loan payments at 10 percent of their discretionary income.
The loan will be forgiven after 20 years, instead of 25, under current law. And also starting next year, students who have two types of federal loans can actually combine them and shave up to a half percent off their interest rates in the process.
Education Secretary Arne Duncan says these programs are going to help millions of borrowers.
Arne Duncan: These are changes that will make a big difference in the lives of current college students as well as recent graduates who are entering one of the toughest job markets in recent memory.
And Steve, that difficult job market is of course why the administration is trying to speed things up — this plan was originally supposed to take effect in 2014.
Chiotakis: You mention the White House says it’s going to help millions of borrowers. But how many will actually sign up?
Marshall-Genzer: Probably more than we’ve seen in the past. The federal government has allowed low income graduates to cap their student loan payments since 2007. But only, Steve, about 450,000 of the 36 million student loan borrowers in the country have actually signed up for that program.
But Jack Jennings, who’s the president of the Center on Education Policy, told me that’s just because they didn’t know about it.
Jack Jennings: You know, people throw their mail away and that’s the way most people who have student loans are dealt with — through the mail. So this is going to be taken advantage of much more than previous measures have been.
And Steve, Jennings says people are going pay attention this time because the president is the one telling them about it.
Chiotakis: Marketplace’s Nancy Marshall-Genzer, in Washington. Nancy, thanks.
Marshall-Genzer: You’re welcome.
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