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Obama could ease student loan burden

College students

TEXT OF STORY

Bill Radke: When President Obama gives his State of the Union address tonight, he'll announce new initiatives aimed at helping the middle class. One of those proposals could help college students deal
with the burden of loans. From the Marketplace Education Desk, Caitlan Carroll has more.


Caitlan Carroll: Right now, most graduates must spend 15 percent of their disposable income paying off their federal student loans each month for up to 25 years. Under the new proposal, loan payments will drop to 10 percent of disposable income, and will be forgiven after 20 years.

Erin Barnhart says the change couldn't have come at a better time. She's just finishing up a doctoral degree in urban studies.

Erin Barnhart: I hope that, you know, for some people that's going to break down some of those barriers to going to school. But for people who have already taken the leap, like myself, it gonna make a real big difference.

Barnhart owes over $100,000 in student loans. And there aren't a lot of jobs in her field right now.

Mark Kantrowitz is a publisher of financial Web sites like Finaid.org. He says the plan will be relatively inexpensive for the government because most people pay off their loans.

Mark Kantrowitz: And it also means that students who borrow money can be assured that by the time their own children enroll in college, they will not still be paying back their own student loans.

The proposal is expected to be included in the president's budget next week, and still needs to be approved by Congress.

I'm Caitlan Carroll for Marketplace.

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I agree with Obama. I have about $45,000 in debt all consolidated but never got to finish school do to health reason. By the time I was able to return to school my loans were defaulted and I had to work full time to get them out of default.
I havent been able to return to school because i cant afford to pay off the loans I have now since all of the fees and interest that they added to my loans. I have lost me job and been out of work for 1 year now and I really wish I could go back and finish my degree but know all of my computer classes are out dated and I would have to start from scratch.
When I consolidated my loans my payment was agrree on at $125 a month. Two month later they sent me a bill telling me my payment was now $345 a month. I could afford that so I kept sending the $125 for 3 years and the amount didnt even cover my interest. So they added morew fees. I dont know what to do. Instead of bailing out the banks Obama should bail out the people.

My wife is a public school teacher. She amassed over 100K in student loans while persuing her Masters of Education. When I married her I knew that we would have this burden as long as we were a part of the working force. Her student loans just about equal our mortgage. At this point, we can't really afford children, and extra spending. We are both very responsible spenders because of this fact, and live life within a very strict budget. Imagine how something like this could impact the economy. An extra 800 in our account each month would allow us to buy a new car, eat out more often, shop more often, etc. I think this is a great idea, especially for teachers. It is not cheap to get the degrees needed to be an effective educator, and after all if you have bad teachers you will have bad students. Professions like these are the ones who would benefit most. We need to keep the best people as doctors, teachers, etc to make sure we remain on par with the rest of the modern world. I'm not a huge Obama fan, but this would definitely impact me so much personally I would have no choice but to wave the flag.

It's probably tacky to comment on a story I was quoted in, but I just wanted to briefly respond to Jason's comment. He's absolutely right that the world may not need more doctorates in Urban Studies. However, I disagree that I made a bad decision or investment in pursuing my doctoral degree.

First, I fully agree with Graham that the investment the government is making in this case is not about paying off individual debt but rather investing in an educated populace. With college costs continually rising, I'm concerned that more people will think twice about pursuing higher education, especially when faced with the prospect of 30 years of significant debt; initiatives to assist with the repayment of student debt will ideally make continued personal and professional education more accessible for those who might otherwise forego it out of financial concern.

Second, while I do wholeheartedly appreciate forgiveness of the remainder of my loans after 20 years, I did not enter into my education with this expectation. When I began my studies, I expected 30 years of student loan payments exceeding $800 a month and was prepared to deal with the hardships that came along with that. The fact that the government sees fit to help me with the investment I’ve made in myself as an educated member of the American workforce is a (albeit fully welcome and appreciated) bonus.

Lastly, speaking of workforce, it’s important to note that this brief news story only provided two facts about my education: my degree program and my debt load. What it didn’t mention is that I’ve been in the workforce for almost 20 years now and in fact am already employed full-time in a career I love and a position that will directly benefit from the completion of my studies.

Apologies for the long post but I appreciate the opportunity to provide a bit more context to my quote.

Though President Obama's proposal today to cap FEDERAL student loans at 10% of one's discretionary income is a step in the right direction, I am still very concerned that those who took out highly toxic private loans during the easy credit bubble will continue to be forgotten. We really need to have the option of havin...g our private loans "converted" to federal loans. If anyone in our govt reads this, please consider how much this would truly help stimulate the... economy! These loans have none of the benefits of federal loans including deferments, forebearances, and consolidations not to mention the variable high interest rates. Did you know that by missing JUST ONE payment you could go into immediate default resulting in 25+% fees being added to the principal?!?! The private loan fiasco cannot be continued to be swept under the rug like this. It is a true cancer on our economy that has been allowed to grow out of control and needs to be treated.

@Jason: I went to law school as an investment in my future, and also have well over $100,000 in loans because of it. But my choice of study has nothing to do with whether it's easy to find jobs right now. My family is struggling to get by month-to-month as well, and a lowering of the required monthly payment would be a huge help.

I agree that loans should be paid off, but sometimes it's a good idea for the government to invest in having a diverse and highly-competent knowledge base as we head toward the future, and for that to happen it may be necessary for the government to help subsidize that by forgiving a portion of long-term loans.

That's what investment is all about--giving up some things in the short term (say, the next 5 to 15 years) in order to reap significantly higher benefits in the long term (say, 20 to 50 years). Having a more educated populace in the long term will required some sacrifices in the short term, but our country as a whole will be all the better for it.

Why is it a good idea to forgive student loans? I'm really tired of people thinking that just because it's difficult then they shouldn't have to pay back money they borrowed. Maybe the world doesn't need more doctorates in urban studies and that's why there is no jobs out there for this person. This person made a poor choice in what to study in school. It's been said that higher education is an investment in yourself. Why do we want to bail out more people who made bad investments?

I think this is long overdue, but I do not see where it will help keep college costs down. Textbooks, for example, just keep getting more and more expensive.

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