Loan assistance is only part of a bigger issue college students face, some say.
President Barack Obama recently announced a program that he claims will help students acquiring large amounts of debt from their federal loans.
The loan-relief program could lower the highest required payment on student loans from 15 percent of discretionary income annually to 10 percent.
Remaining debt will be forgiven after 20 years instead of 25, which could affect 1.6 million borrowers.
In addition, Obama’s plan allows borrowers to combine their loan from the Federal Family Education Loan Program and their government direct loan into one. This consolidation would have up to one half of a percentage point less than it did previously, according to CBS News. It could affect 5.8 million borrowers.
Former university president and political science professor David Adamany said the program appears to be helpful, but the absence of particular details in the media’s coverage still leaves him unsure.
“I find that the deferral of loans for some graduates will help those unemployed in the current recession and that the ‘forgiveness’ of loans after a fixed period of time will certainly help students,” Adamany said. “[But] I do not yet understand how the deferred payments will work: Will students then have to make largely monthly payments later if they defer now…must a student have made all of his or her payments for 20…years in order to be forgiven?”
Others are skeptical toward the effectiveness of Obama’s plan as well.
The San Francisco Chronicle reported that the consolidation of a direct loan and a FFEL loan would only receive a reduction of 0.25 percent on its interest rate, providing minuscule savings.
The following example was in the Chronicle: If the two consolidated loans have $20,000 at a 6.8 percent interest rate, one would only retain $2.56 per month, or $307 during 10 years?
Sophomore biology major Skye Curry said the program looks good superficially, but it doesn’t address the overall issue that continues to hit students: tuition hikes.
“How about you put a cap on how much the schools can raise their tuition,” Curry said. “Because if you put a cap on student loans, but the school’s tuition is going higher, how is that going to level out?”
Adamany said he also believes there is a “larger question” of state governments supporting their universities when deciding what goes into the state budget.
“One of the causes has plainly been the withdrawal of state support from public universities because state treasuries have been drained by the escalating costs of Medicaid,” Adamany said. “So until the health care system in this country is somehow fixed, state support for higher education will be inadequate and students will be required to pay a larger share of higher education costs.”
Temple increased its tuition by 10 percent for this fall, with in-state costs rising to $13,006 from $11,834 and out-of-state prices rising to $22,832 from $21,662.
Borrowers who are in default or took out federal loans before 2008 will not qualify for the program.
Curry, who has a significant balance accumulating from her direct loans and a Perkins loan, doesn’t find relief in the program for herself.
“I feel like you’re still in that tight, little restriction by the government,” Curry said. “I mean, I love Obama and all, but over the past few years I’ve really been slapped in the face with federal loans. It’s a struggle.”
Payne Schroeder can be reached at email@example.com.