Obama modifies federal loan plan to reassure college students

     Last Wednesday, President Barack Obama presented an expedited plan at the University of Colorado to reduce the burden of student loan debt.

     Congress previously approved a version of this plan in 2010 to begin in the year 2014. Obama declared that he will use an executive order to institute a modified plan as early as 2012.

     His altered plan will apply to people who have Federal Direct loans, Stafford loans and Perkins loans. Two main components of the modified plan are that it will reduce individuals' monthly payments from 15 percent to 10 percent of discretionary income and that the government will forgive student loans after 20 years rather than the 25 years decided by the last plan passed by Congress.

     Obama's plan provides loan forgiveness exceptions to promote public service. Any individuals who choose to spend 10 years in public service positions are eligible to have their loans forgiven at the end of those 10 years. For those with FFEL and Direct loans who work for low-income elementary or high schools, as designated by the Department of Education, the federal government will forgive their loans after five years. Lastly, the federal government will forgive the student loans of military personnel in all five branches of service.

     Additionally, the plan will allow debtors to consolidate their Federal Family Education loans with their direct loans; this consolidation could lead to a decreased interest rate of up to half a percentage point. The plan does not apply to those with private student loans or to borrowers who have defaulted on their debt.

     In his speech, Obama sympathized with the crowd of University of Colorado students. He said, "I know you're hearing stories from friends and classmates and siblings who are struggling to find work, and you're wondering what's in store for your future. And I know that can be scary."

     He also referenced his past experience with student loans. "This is something Michelle and I know about firsthand," Obama said before adding that he and First Lady Michelle Obama had a combined $120,000 student debt when they were married. He joked, "We combined and got poorer together."

     Obama also criticized Congress for rejecting his $447 billion jobs bill last month; Congress said its main reason for refusing to pass the bill was to prevent taxes from increasing. The president said, "It's time to put country ahead of party. It's time to put the next generation ahead of the next election."

     The Republican primary presidential candidates have generally responded negatively to Obama's plan. Michelle Bachman said via satellite from Minneapolis for an education forum in New York hosted by The CollegeBoard and News Corp., "There is morality in keeping our financial promises, and I don't think we should push that off onto the taxpayer. The individual needs to repay and be responsible for repaying their student loan debt."

     Newt Gingrich, former Speaker of the House and GOP candidate, called Obama's decision a "Ponzi scheme." He asserted that the president is merely appealing to young people by telling them that they do not have to pay their debt and then saddling them with an even greater national debt as American taxpayers.

     The Institute for College Access & Success reports that the average student loan debt for the class of 2009 for four-year institutions was $24,000. The Bureau of Labor Statistics states that the unemployment rate for college graduates aged 24 and younger is 9.4 percent.

     According to a report released last Wednesday by CollegeBoard, the cost of attending a public university for one year has increased to $21,447 and private colleges have increased their tuition fees to $42,224.

     More than 36 million Americans have student loan debt. The nation's total student loan debt has surpassed $1 trillion.

     During Obama's appearance on NBC's The Tonight Show with Jay Leno, the president said, "Everybody needs to understand that the American people feel like nobody's looking out for them right now." As reported by the Roper Center for Public Opinion Research, 66 percent of American voters aged 18-29 voted for Obama in the 2008 presidential election.