Washington Begins to Tackle Student Loan Issues

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Julian Moore
National News Beat Reporter

During his first election campaign, then-Senator Barack Obama made numerous promises to fix an ailing economy, many of which became the focus of the last year’s election. But the promises President Obama made in 2008 to deal with ballooning student loan debt flew conspicuously under the radar. Today, despite significant legislation to expand loan forgiveness, student debt currently exceeds all credit card debts in America and in 2012, student loan debt in the United States passed the $1 trillion threshold. But Congress and the president may yet have a plan for tackling one of the nation’s most pressing economic problems.

The cost of higher education has skyrocketed over the past 30 years, with the average tuition at 4-year institutions going from $3,499 in 1980 to $22,092 in 2010.

So each year, thousands of college students depend upon loans from both the federal government and private lenders to achieve their college degrees. Nearly two-thirds of college graduates borrow to pay for college, with an average debt upon graduation of about $26,300.

But the combination of crushing debt and a lukewarm job market has compounded the effects of the economic downturn for students everywhere.

Congress first took action on student loan debt in 2007 when California Rep. George Miller (CA-7) introduced the “College Cost Reduction and Access Act,” with 31 co-sponsors and strong bipartisan support. The most significant part of the bill created an alternative to standard repayment plans in which students’ payments are fixed and made for up to 10 years. The new system allowed students to pay back their loans at a rate determined by their level of income upon graduating. This income-based repayment plan (IBR) was then capped at a maximum of 15 percent of the students’ income whenever they get a job.

Despite the new payment option, however, the IBR program failed to gain popularity among students who need it most.

But still, in 2012 the amount of defaulted student loans in the United States reached $76 billion, forcing Washington to go back to the drawing board. In response to the stagnant pace of debt reduction,  Obama made a number of changes in a June 2012 memo, including a streamlined application process and the creation of integrated online and mobile resources for students and former students to use in learning about Federal student aid.

Then, in March of last year, a law introduced to the House of Representatives by Hansen Clarke sought to dramatically increase the scope of debt forgiveness. The law would cap IBR repayments at 10 percent, and make the maximum period of repayment 10 years. The so-called “10-10” plan would also put a permanent cap on federal student loan interest rates at 3.4 percent. That number nearly doubled to 6.8 percent in the summer of 2012 before Congress took action at the last minute to re-instate the lower rate.

A study conducted by the New America Foundation found that the 2012 bill wouldn’t mean much to undergraduates who typically pay $80 to $100 per month. Graduate students in law or business schools, however, could see a huge payoff in the new repayment structure since the high incomes in those professions will shorten the time and amount they have to pay back. The more these graduates earn, the more they have to pay back, and the difference between paying for 10 or for 15 percent is exaggerated every year.

Supporters of the bill, including Obama, endeavored to persuade a notoriously unproductive 112th Congress on the issue of student loan forgiveness. But by the end of the 112th’s second session, the bill had not been voted on and died in the House.

Photo Courtesy of Eva and Rodney Hargis

While the policy solutions may still be up in the air, it’s clear that the future of students looking to enter the job market is on the minds of people in Washington.

“I’m the president of the United States,” Obama said. “We only finished paying off our student loans about eight years ago.”

10 COMMENTS

  1. Student debt is stunting the growth of the economy. Student loans have increased by 275% over past decade. As the next generation graduates from college, they are plagued by insurmountable debt that places demands on their income, limiting their ability to spend their earnings in ways that stimulate the economy.

    http://www.youtube.com/watch?v=mRA9ndc1pCM

  2. This is a CRISIS. The strangest part of this student loan lending debacle is this. It’s a form of social control by Crony Capitalists. Our own government is letting the money changers/bankers bribe our elected officials. The members of the Ed. Committee had PAC money backing them by the Educational Bureaucrats, one of them was Virginia Foxx. Look it up folks. You can see who their financial backers are. And the bankers are picking our pockets everywhere they can. The American college student is being exploited, and with the removal of Glass-Steagal, Consumer protections, and lack of governmental transparency over the past 20+ years.. these money changers have had a financial boom……….while the average American has had a financial bust. Thankfully, the Consumer Finance Protection Bureau is beginning to work and is responding to tons of letters and e-mails at their comment center, and investigations are being done to address the predatory and unscrupulous lending and student loan practices at the nations colleges. Google it folks…..the net is filled with all this information. This is just another Crony Capitalistic maneuver to rob Americans of their freedoms. Indentured servitude has been a slavery technique in the past……….and it’s been revised 20th Century style by the banks, the PACS and our Bought Congress. Elizabeth Warren……..she is on the ball..and more like her, that have heard the plea of the public outcry. Hopefully, once again, we will let Freedom Ring. Awarness is key. Please join StudentDebtCrisis.com and help us change this usurious system and bring down tuition and help our students survive and thrive.

  3. Here at Student Debt Relief we are able to get your student loans out of default with in 4-6 weeks through several government programs you may qualify for, this will allow you to file your taxes next year and receive a monthly payment that can go as low as $25. This will clear up your credit report and you will then be able to qualify for additional finical aid please give me a call 1-855-429-9577 http://www.wehelpstudentdebtrelief.org

  4. Pay for your own college loans. Why should other taxpayers pay for you to get an education. Loan forgiveness is RIDICULOUS!!!! If you borrow it….you pay for it!!! I pay for my own college by working for it!!!
    You are just deadbeats looking for the Gov’t to give you free money.
    Pay it yourself!!

  5. It’s a kind of confidence scam. You want a good job, so you get trained for it by means of some training facility. You could learn on your own, but the training facility convinces you that you can’t b/c you would not have an accredited transcript to verify that you had learned it. So, not wanting to be labeled a “loser” but not having enough money for their precious transcript, you have to take out loans to get what they have to offer. The employers are in on it to by escalating their job requirements and in turn they can invest in the companies servicing the loans in order to turn a profit.

    In other words, there’s a tiny number making a LOT of money on the basis of your trust that the training facility and employer will work together to help you out.

    Damn thing about it is that you are essentially playing games with people’s intrinsic worth (their soul, if you will) since it is the student’s expertise and education that helps to defines who they are on a material and immaterial level. Of course, if you are a corporation, intrinsic worth is irrelevant. All humans are merely fruit to be picked by the corporation and then squeezed until they have nothing left to offer.

    But yeah, squawkers like John remind me of Samuel Jackson’s character Stephen in Django Unchained. “Django, you uppity son of a… !” Yeah. How dare we try to get relieved of debt from making ourselves better?

  6. I always believed that working hard would pay off. Well, not anymore.
    I worked hard in school and grad school and I’m definitely paying for it. I still live in a 1 bedroom apartment and drive an 8 year old car because I can’t afford anything else.
    I’ve been paying on my student loans since 1998 and have yet to be able to get ahead.
    Damn right I want loan forgiveness, especially after my idiot boss promoted someone who never even went to college over me, even though I was more suited for the position! So, now I haven’t had a raise in 3 years, live in a dumpy apartment and drive an older car while paying $550 a month in student loan payments while the untrained guy who was promoted instead of me drives around in a new Lexus that he parks in front of his new 4 bedroom home with a pool.

  7. I am over 100,000 in private student loans. At 15% interest it is more than my entire income.

    I demand loan forgiveness now. I will not be a slave. It is a form of slavery.

  8. I AGREE WITH DAN…I DEMAND LOAN FORGIVENESS NOW. I AM A NURSE THAT WORKS VERY HARD CARING FOR LOVED ONES EVERYDAY OF LIFE. I LOVE MY JOB, I NEEDED THE STUDENT LOANS TO HELP ME PAY MY BILLS WHILE GOING TO SCHOOL. IT IS TOUGH GOING TO NURSING SCHOOL AND YOU CANNOT WORK AT THE SAME TIME. YOU EAT, SLEEP, AND BREATH NURSING WHILE GOING TO SCHOOL. NOW THAT I AM GRADUATED AND HAVE A JOB ALL THE PRICES OF EVERYTHING HAS GONE UP. IT COSTS ME 15 DOLLARS A DAY JUST TO GO BACK AND FORTH TO WORK..THEN THE PRICE OF ELECTRICITY, WATER, SEWER, AND NOT TO MENTION GROCERIES CONTINUE TO SOAR. I LIVE PAYCHECK TO PAYCHECK AND THERE IS NOTHING LEFT TO PAY MY STUDENT LOAN PAYMENTS. I HAVE HIT THE BOTTOM OF MY BARREL. SOMETHING HAS TO BE DONE. I CANNOT EVEN FILE MY INCOME TAXES AND RECEIVE A REFUND TO MAKE HOME IMPROVEMENTS TO SAVE MYSELF MONEY ON MY BILLS BECAUSE MY LOANS ARE NOW IN DEFAULT. WHEN I FILE THEY WILL BE TAKEN AND THEN THEY WILL GARNISH MY WAGES FOR 25 PERCENT EVERY PAYCHECK AND THIS IS BEFORE TAXES. THERE IS NO WINNING AT THE SLAVERY THAT THE STUDENT LOAN COMMISSION HAS US IN. THANK YOU FOR HEARING MY COMMENTS

  9. The amount of studet loas nd the idea of loan forgiveness is depressing. I think the loans should not be fully forgiven or even at all, but give the students more time to repay the loan. I also think the colleges nd universities should lower the cost of gettig a college education.

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