Obama and Student Loans
With the Occupy movement taking place across the country, American political and financial ideology is currently being challenged in a way that it has not been in a very long time. President Obama hoped to cash in on this groundswell a couple of weeks ago when he announced his student financial loans plan at a college campus in Denver.
The announcement was no doubt a response to the Occupy movement which is dominating the national discourse, as well as an attempt to regain, for the upcoming election, the young voters who were so helpful to him in 2008 but have since lost faith in Obama’s message of hope and the national government in general.
While the reform does make some good strides toward eliminating the student debt problem, it does not come close to completely erasing student debt, as over 600,000 people made clear they wanted the Obama administration to do in an online petition. In fact, the overwhelming majority of those 600,000 people and those participating in the Occupy movements will not benefit from this reform.
The program was actually passed by Congress last year, and was slated to go into effect in 2014, but President Obama pushed it up two years, with the new plan now going into effect January 2012. For those eligible, it will lower the maximum required payment on student loans from 15 percent of annual discretionary income to 10 percent, as well as forgive all remaining debt in 20 years as opposed to the current 25. In addition, borrowers will be able to consolidate their government loans and their government-backed private loans into one loan with a lower interest rate. The administration says that these two pieces of the plan will benefit 1.6 million and 5.8 million Americans respectively. The problem is that there are 36 million borrowers already in repayment, and this new reform will not help many of them.
For example, recent college graduates will not benefit, even those who graduated as recently as 2011, as the program requires the borrowers to be new since 2008 and have at least one loan that was started in 2012. That means that students with loans from 2007 will not be eligible, even if they are still in school. Likewise, those who are already in repayment will not be eligible, nor will those borrowers who are already in default.
There are some good things about President Obama’s plan though. For instance, the consolidating aspect will bring all federal loans under the government, removing the private lender from the equation, which can only be a good thing. However, this plan is not enough. With federal interest rates set to double next July, some of the stress relieved by the plan might be quickly put back on the shoulders of American borrowers.
With student loan debt topping $1 trillion this year, for the first time ever surpassing credit card debt, and students graduating this year with an average of about $25,000, resolving the student loan dilemma is more crucial than ever.
But with all this being said, what does it mean for students at UC Irvine right now? Well with tuition increasing this fall by 8 percent and then 9.6 percent right before the start of the quarter, as well as planned increases of 8 to 16 percent over the next four years, possibly reaching an annual tuition of $22,068 by the 2015-2016 academic year, student-loan reform is essential for Anteaters. An economy that displays no signs of getting better any time soon, with a high unemployment rate to boot, is not very friendly to a recent college graduate paying several hundred dollars worth of debt each month. And as higher tuition costs coincide with a failing economy, students will be forced to take out even more loans. Therefore, while President Obama’s plan might be applauded by some, it really will not do much to alleviate the 36 million Americans burdened by student debt. The plan does not even acknowledge what might be the largest problem with student debt, which is the rising cost of tuition at colleges across the nation.
The Occupy movement has gotten us this far, and while President Obama could definitely do more to ease the stress placed on college graduates by student loans, he probably won’t. If we want change we will have to continue to make our voices heard.
Joel Marshall is a third-year literary journalism major. He can be reached at firstname.lastname@example.org.