Obama Plan Will Help Families Address Student Loan Debt

Obtaining a college degree is a desirable, but expensive goal. Luckily, new assistance tools can help students uncover new ways to afford an education amid rising tuition costs.

If you’re a recent college graduate or are in the midst of a college search, you might worry how you’re going to pay off school debt or afford rising tuition costs. There are several justifiable causes for your fears.

First, skim the major headlines, and you’ll see that unemployment rates still hover around nine percent, meaning there’s more competition for the few jobs that are available. And, while a college degree makes you more desirable to employers, finding a job can still be difficult.

Adding insult to injury is the fact that a hard-earned degree costs a lot of hard-earned cash. The average student loan debt for a college education tops $25,250, according to the Institute for College Access & Success' Project on Student Debt. This leads some to question the merits of a college education, as reported in a CNN Money article.

But despite the high cost, the value of a college education remains clear to many. In fact, a Georgetown University Center on Education and the Workforce study confirms that the value of a college degree is increasing. Individuals with a bachelor’s degree now make 84 percent more over a lifetime than those with only a high school diploma, up from 75 percent in 1999.

Despite the ultimate payout of a college education, one fact remains clear: it still costs a lot of money to earn a diploma. (If you want to read the data, see the College Board Advocacy & Policy Center’sTrends in College Pricing 2011 and Trends in Student Aid 2011.) So what’s a family to do?

President Obama Launches Aid Plan

It’s precisely these concerns that prompted President Obama to announce a plan to make college more affordable and ease the burden of loan repayment. Here is a summary of that plan:

• “Know Before Your Owe” Decisioning:The Consumer Financial Protection Bureau has partnered with the Department of Education to create a form schools will use to clearly disclose what financial aid packages families qualify for so they can compare options and make better-informed enrollment decisions. The goal is to help families understand their estimated financial obligations beyond federal aid.
   
• Income-Based Monthly Payment Caps:An improved income-based repayment (IBR) plan caps monthly student loan payments at 15% of borrowers’ discretionary income, thereby improving their ability to make regular payments. Beginning on July 1, 2014, this amount should reduce to 10%. An estimated 36 million Americans have federal student loan debt, but fewer than 450,000 participate in an IBR plan. The Obama Administration is therefore actively promoting the plan and making it easier for borrowers to participate. Determine whether an IBR is right for you at http://studentaid.ed.gov/ibr. 
   
• Loan Forgiveness for Public Service Workers:If a student loan borrower works as a teacher or is employed in some other public service occupation, the person becomes eligible for loan forgiveness under the Public Service Loan Forgiveness Program, following 10 years of consistent payments. Review this fact sheet for more information.
   
• Attractive Consolidation Loans: Consolidation loans can help borrowers avoid default and streamline repayment processes foroutstanding Federal Family Education Loans (FFEL) and Direct Loans, which currently require two separate monthly payments. Qualified borrowers will learn more about this incentive program from the Department of Education beginning in January 2012, and stand to benefit from making only one payment per month instead of two, with the possibility of a limited-time offer to receive small interest-rate reductions.
   
• Online Debt Repayment Tools:The Consumer Financial Protection Bureau has launched the Student Debt Repayment Assistant, an online tool to provide struggling borrowers with information on income-based repayment, deferments, and alternative payment programs.

There are a lot of options when it comes to selecting a school, and now there are a growing number of options to help students and families afford an education.

In addition to the programs and tools mentioned above, click here for money-saving tips once on campus or here for some basics about financial aid before you enroll. 

If you liked this you may also like:

• Student Financial Aid 101

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• Dependency Status - How It Affects Federal Student Aid

  You might legally be able to buy shots at the local bar, but you still need your parents' information when filling out the FAFSA application. The U.S. Department of Education considers a student a dependent until the age of 24, except in certain circumstances. This is important because your dependency status can affects how your Expected Family Contribution, or EFC, is calculated on the FAFSA application.

• Depression, Stress, and Anxiety on the Rise in Colleges

  A 2008 national survey of college therapists conducted by the American College Counseling Association (ACCA) showed that the number of students seeking mental help has significantly increased in recent years. In fact, 95% of the college therapists surveyed said more students were coming to them with serious psychological problems. Nearly one in every ten students is now utilizing campus therapists to deal with mental and emotional problems.

• Pell Grant Guide

  The Pell Grant is one of the many financial aid options provided by the federal government, and it's possibly the best known grant out there. The Pell Grant program was begun by the Department of Education way back in 1972, making it the granddaddy of federal grants.

• College Tuitions Jump Across Country, but Financial Aid Keeps Pace

  Well, the news is in, and tuition prices are up. The most recent report out of the College Board announced that the average tuition at four-year public colleges in the U.S. rose $429 to $7,020, a 6.5% increase of last year’s numbers. Private colleges experienced a similar incline, as tuitions across the country rose 4.4% to $26,273. Including room and board, the price tag associated with public schools jumps to $15,213. Private schools face an average cost of $35,636 when you factor in the costs associated with college life outside of the classroom.

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