(From The Louisville Cardinal)
By Rae Hodge–
As total national student loan debt nears $1 trillion, President Barrack Obama announced the Student Loan Relief Act on Oct. 26.
President Obama said he will allow revision to federal law, which would proportion borrowers’ monthly student loan payments to their respective income thereby making them easier for millions of former and current students to repay.
According to a press release from the White House, the new policy would take effect in 2014, when student loan “borrowers will be able to reduce their monthly student loan payments to 10 percent of their discretionary income.
Building on previous student loan legislation, student loan repayments would follow a pay-as-you-earn model, with the maximum payment capped at 10 percent of the student’s income. A decrease of 5 percent from the previous cap of 15 percent.
Federal loan forgiveness will occur after 20 years, in contrast to the 25 years in current law. In addition, some borrowers will qualify for federal student loan consolidation at reduced interest rates.
Tascha Hader, a senior criminal justice major of U of L, said the act “just doesn’t seem very substantial” to her.
Given that this act comes at a time when reports indicate that student loan debt is at an all-time high, nearing $1 trillion dollars, many other students may be in the same boat.
The U.S. Education Department last month showed an increase in the default rate on federal student loans, the highest since 1997. The rate has been climbing steadily for the past few years.
“Student loan debt has now surpassed credit card debt for the first time ever,” Obama said. “And when a big chunk of every paycheck goes towards student loans instead of being spent on other things, that’s not just tough for middle-class families, it’s painful for the economy and it’s harmful to our recovery because that money is not going to help businesses grow.”
Kelsey Froendhoff, a U of L junior and international relations and linguistics major, said she is using money from a current student loan to pay off past school loans.