President Obama Tackles the Student Loan Crisis

Katie Simon
Posted

President Obama Speaks On Trade Rights With China In The Rose GardenFor the more than 37 million Americans who currently owe money in student loans, paying them off could become slightly less challenging.

President Obama has announced his plans to enact several pieces of legislation to help ease the burden of student loan debt, The New York Times reports. First, he intends to extend a 2010 law that caps borrowers’ repayments at 10% of their monthly income. Starting December 2015, the law will apply to five million borrowers who were previously ineligible because they took out loans before October 2007 or stopped borrowing before October 2011.

The White House has also announced its support for a Senate bill that could help 25 million Americans refinance their federal and private student loans at a lower rate. (At this point, it’s unclear whether the bill will garner enough Republican votes to pass.)

To keep borrowers from defaulting on their loans, Mr. Obama is working with companies that provide federal loans to give additional financial incentives for borrowers to make their payments on time. In collaboration with tax-preparation firms H&R Block and Intuit, Inc., the government will help ensure that borrowers stay in the loop when it comes to repayment options and tax credits for college tuition.

According to the Congressional Budget Office, Americans currently owe a total of about $1 trillion in federal student loans or loan guarantees—in addition to more than $100 billion in private student loans.

Curious about your current options for repaying federal loans before the proposed changes take effect? Learn more about the different plans here.

  • David

    I think one of the biggest ways to help would be to lower the interest rate on student loans. I graduated in 2003 and at the time my student loan interest was 2.8%, it is now down to 1.8% because of automatic withdraw and 3 years of on time payment. My wife who graduated in 2011 is paying 6.9% on her student loans. While we make the payments they are pretty high and would be a lot better if they were at the same rate as my interest rates. I am not sure what rates student loans are at now.

  • Melissa

    Agree with David. My federal student loans have a higher interest rate then our mortgage. And this is the government thinking they are helping??? We need lower rates. The consolidation plan for me would raise my interest, not lower it.

  • Melissa

    Lowering interest rates is the best solution. Lowering monthly payments will only make us pay more in the long run. A majority of graduates want to pay their loans off. But, with high interest rates (some over 8%), the interest accruing monthly on some of my loans is higher than my monthly payment. The high rate has made it almost impossible to pay down any of the debt, even when paying hundreds of dollars extra every month.
    I refinanced some of my loans with Sofi http://friends.sofi.com/6PBBq and lowered my rate to under 4% (yes, there are some private refinancing options). My monthly payments are higher than before, but at least I am now paying off my loan balance and not just paying interest every month like I had been doing for years. It’s highly recommended if you can afford to make extra monthly payments!