By Alec Lautanen
Executive Opinion Editor
President Barack Obama’s “Pay as you Earn” program, a student loan plan that expedites a previous Congressional proposal, will alleviate debt for America’s student population, encourage college enrollment and give relief for those with growing payments.
The executive order provides a number of measures to improve the financial situation of a broad sector of the student population, and with its implementation, college students and graduates will benefit from much lighter burdens with student loans.
Obama’s plan came into being after a report by USA Today revealed student loan debt had reached over a trillion dollars. Petitions on the “We the People” White House website showed growing concern over student loan payments.
A law passed in Congress last year covered the basic principles of the plan, which includes lowering maximum monthly payments for government loans from 15% to 10% of annual income and forgiving loans after 20 years instead of the current 25. Obama’s proposal also states that this law will go into effect next year, instead of 2014.
According to White House projections, this plan affects up to 1.6 million borrowers. Furthermore, Obama’s proposal would allow students who possess loans from the Federal Family Education Loan Program, as well as direct government loans, to consolidate payments, an initiative that would decrease interest rates by roughly 0.5% for about 5.8 million people.
The steps outlined in Obama’s plan would prove helpful to those burdened with increasing payments. White House studies show that the changes enacted in the proposal could potentially save students up to several hundred dollars per month, and this extra change could go far in stimulating a weakened economy.
Critics claim Obama and the executive branch are overstepping authority by bypassing Congress to enact these plans. However, opponents ignore the fact that Obama modifies only execution and timetables, not policy.
Another point that the program aims to correct is the distribution of loans through the Federal Family Education Loan Program.
With Obama’s revisions, private banks are eliminated as middlemen, and the government backs the loans. This improvement will provide students will both lower interest rates and stronger government protection, potentially saving students over $60 billion over the next 10 years.
Critics also state that the federal government cannot adopt such a plan due to the looming budget crisis. Obama’s student loan program would be free to taxpayers, as consolidated loans would free the government from paying subsidies to private lenders.
Obama’s student loan plan would go far in enticing students to seek higher education and reducing loan burden for current debtors. The proposal provides a solid and affordable payment timeline for millions of borrowers at no cost to taxpayers.
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