President Obama's Plan to Make Your Student Loans Less Horrifying

Illustration for article titled President Obama's Plan to Make Your Student Loans Less Horrifying

Underemployed, overeducated, post-graduate sticker shock sufferers, rejoice— President Obama is going to announce a student loan plan that will allow you to pay slightly less per month and cap the amount you have to pay back per year. Someone's breaking out the Fancy Ramen tonight!


MarketWatch reports that on Wednesday, the President will go into detail about his plan, which will include rule changes that allow private and government loans to be consolidated under the same government program and paid back with a lower interest rate. Obama will also announce plans to move a regulation that caps the amount of your income that can go toward repaying loans at 10% from 2014 to next year. With a $30,000 per year income (let's say we are all beautiful souls who perform thankless but necessary entry level nonprofit work), no matter how much you owed, your obligation for repayment would be capped at $3,000, or $250 per month. Not too shabby.

Student loans have become a hundred billion dollar business, swelling at a bubble-like rate over the last few years. In August 2008, the government's student loan program managed $107 billion in student loans. In August 2011, there was $392 billion in the coffers. This rapid expansion combined with limited repayment ability of borrowers sparked fears among some analysts that mass student loan defaults were to be the next bubble, setting off a chain of events that would cause yet another economic implosion, and that the out of control costs of an American post high school education was going to mint an entire generation of workers so far in debt from jump that they could never hope to emerge, let alone retire.

Obama's announcement will be great news to the so-called "lost generation," or people in their early 20's who can't find work (the unemployment rate for people between 20 and 24 is sitting mighty high at 14.7%). This will also be great news to the so-called "I went to a fancy private school rather than my perfectly good state school because I wanted to get out of Wisconsin" generation. Just think, by this time next year, you might be able to afford winter boots.

Obama Set to Unveil Student Loan Plan [Marketwatch]



This is great, and certainly preferable to an entire generation defaulting on their loans, but it would be nice to see some kind of initiative that would prevent this kind of thing from happening in the first place. We've reached a situation where employers require college degrees whether it really helps a person do a job or not (and where college degrees at a minimum, and graduate degrees increasingly, are "required" to move into a management position regardless of your demonstrated aptitude), and colleges are hiking tuition rates every year, and the student loan system is designed to make it seem normal for a teenager or someone in their early 20s to sign a promissory note for tens of thousands of dollars. Is this really how we're going to train future generations of workers too?

And just to be clear: I have a college degree (from one of those perfectly good state schools) and a graduate degree (from one of those fancy private schools), and a totally reasonable loan repayment plan that I can afford and is pretty commensurate to the long-term benefits I'm receiving from my education. I'm not looking for a solution for my special problems. I'm actually just worried about this weird system we've created in this country that benefits governments, colleges, and banks without actually improving the quality or training of our workforce.