On Wednesday, October 26th President Obama introduced a new Pay As You Earn Plan to a group of Denver college students. This plan revamps the existing program by capping required payments for eligible college students at a lower percentage of their income and forgives student loans in twenty years.
Currently student loan debt is the second highest source of overall household debt. "Over the past three decades, the cost of college has nearly tripled," said Mr. Obama. "And that is forcing you, forcing students, to take out more loans and rack up more debt. Last year, graduates who took out loans left college owing an average of $24,000. Student loan debt has now surpassed credit card debt, for the first time ever. Living with that kind of debt means making some pretty tough choices when you're first starting out." President Obama also believes that the new plan will boost the economy by allowing previously indebted students to be allowed to purchase houses and spend more money.
The original Pay As You Earn Plan was 10% of discretionary income and loans forgiven at 25 years, so it seems that Obama’s plan is obviously a better deal for those of us who have student loan debt but it doesn’t change the plan by much. These numbers make the current outcry of concern by some political figures to be a little overstretched. Representative presidential candidate Michele Bachman was quoted saying that Obama’s new plan is an “abuse of power” and “it gives people an incentive to dodge debt.” Twenty years of repaying your student loan seems to be a far cry from dodging debt; rather this new plan would help people that are newly entering the workforce be able to pay their household bills and take care of home instead of having to worry about giving their entire paycheck up to student loans. Another cause of concern was the rising national debt and who would be responsible for the student loan debts if forgiven.
As previously stated, I think it seems trivial to think that five years and five percent will greatly impact our national debt. There is already a plan in effect that forgives student loans after 25 years, why not help out society and make it only 20? I think this plan is a great incentive for people to be able to finish their education without the fear of starving upon graduation when entering the workforce and it wouldn’t be that “we” aren’t repaying the loan; rather, it is income based and there is an annual documentation requirement so that any payment adjustments can be made according to your discretionary income.
With any new idea comes the possibilities of what ifs but the point is it’s time for a change and it’s about time that the government starts helping more Americans out financially that are in need so that we can all achieve the “American Dream.” In the end, isn’t that the point of higher education?
On Oct. 28th, Raegan Bryant posted an article regarding President Obama’s revision of “Pay As You Earn Plan.” The original plan will reduce the amount that graduates have to pay toward their federal debt balance from 15% of their annual discretionary income and all remaining debts will be forgiven at 25 years. This plan was revised on Oct. 26th. The new plan now includes a required payment for eligible college students at 10% of their discretionary income and forgives student loans in 20 years.
ReplyDeleteThis program will help many college graduates to be able to start their new life. Instead of worrying about college loans, they will be able to focus more on trying to make their life better and at the same time, they will have more money to put back into the economy. This plan could also have implications for Obama’s chances of re-election. Also, this plan will help keep students from straying away from higher education because of costs. Students will have a good credit history and overall the student loan default rate in the nation will decrease. On the other hand, there is somewhat of a disadvantage to this plan. Smaller payments could mean longer repayment period and the loan could accumulate more interest. Also, this plan would only count toward federal loans. Overall, I still think that this is a good plan to help many graduate students become successful in life.