Reduce student loan payments! Oh the lure of advertising. An article by Charles Dervarics in Diverse Issues in Higher Education touts income-based repayment of student loans as one of President Obama’s signature new initiatives. According to the article:
While complex in execution, the idea has a simple premise: Students repay their loans based only on how much they earn. Since payments are pegged to income, borrowers would have the flexibility to take lower-paying public service jobs without excessive debt burden.
Basically, students could cap their monthly loan payments to ten percent of their income. This is an interesting idea but Obama isn’t exactly getting all Robert Applebaum with student debt just yet.
In fact, the Obama loan forgiveness program basically already exists, though it doesn’t actually help much. There’s the Income-Based Repayment program, which prevents students from being forced to make payments in excess of 15 percent of income. There’s also the Income Contingent Repayment program, available to students who only to borrowed money through the government-funded Direct Loan program. Only about three percent of students now take advantage of that program.
The Obama plan, which would extend some form of loan forgiveness to 25 percent of students with education debt, needs congressional approval. According to the Dervarics article, “one prominent leader already has endorsed the change. The change will ‘make repaying student loans more affordable,’ said Rep. George Miller, D-Calif., chairman of the House Education and Labor Committee.” Getting the support of George Miller, a member of the Congressional Progressive Caucus, for a proposal like this is not terribly difficult.