|Obama makes changes to student loans to alleviate debt|
|Written by John Schuller, Daily Vidette Staff Writer|
|Sunday, 06 November 2011 17:19|
President Barack Obama announced two weeks ago some changes to federal student loan programs in an effort to help alleviate some of the growing student debt that is occurring across the country.
The change is effective for students that are graduating as soon as next year and will allow loan holders to have lower monthly payments.
It also allows borrowers who have a combination of direct federal loans and loans under the Federal Family Educational Loan Program to refinance the two together at a lower interest rate.
Additionally, the changes allow a new payment plan for students who are coming into college with loans that allows them to deem 10 percent of their income for the next 20 years to go to their student loans.
This is a change from the current plan, which is a fixed monthly rate over a period of 10 years. If a student chooses this plan, known as the “Pay as You Earn” program, and are not able to pay their loans back in the 20-year span, their debt will be forgiven.
Currently, most students that have student loans have to pay 15 percent of their income over the course of 25 years and not until after that period is the debt forgiven.
Obama is making changes to the federal loan policy in order to combat the rising cost of college and the increase in student loans taken out by students.
“I believe a lot of this has to do with states not able to provide funding to their institutions,” Jana Albrecht, director of financial aid at ISU, said. Compared to 10 years ago and adjusted for inflation, states are giving 23 percent less funds to their college and universities.
“[Illinois’] state institutions are owed hundreds of millions of dollars from our state and, because of that, tuition has gone up,” 16th district State Rep. Lou Lang said.
Lang pointed out that in many instances it is cheaper for a student from Illinois to attend a university out of state than it is for them to attend one of the state institutions.
“It’s difficult now, the state’s finances are really bad. We just cut $3 billion from the budget from many programs we can’t afford to have anymore,” Lang said.
There have been programs that the state has tried to put into place to help students in need of money to go to college, such as the proposal from Lang called “B or Better.”
“I have proposed a bill that if you maintain a B or better [grade point] average and are in financial need, you will have the money to go to school,” Lang said.
However, Lang said due to the state’s high debt, programs like this are not able to go into effect.
The rising cost of tuition is also forcing many high school students and professors to leave the state, Lang said.
“We need to do all we can do to keep people here,” he added.