Obama Student Loans

October 26, 2011 by staff 

Obama Student Loans, President Obama on Wednesday is launching a new plan to reduce the cost of repaying student loans for millions of borrowers – the latest installment in its attempt to move a work program that does not pass through a Congress paralyzed.

Almost one trillion and the federal and private student loans exceeding U.S. credit card debt, which is a formidable payload for many borrowers in a time of near double-digit unemployment.

The plan, which will be executed by the Executive alone, allows nearly 1.6 million students to limit loan payments to 10 percent of their discretionary income in 2012. Also forgive the balance of student loans after 20 years of payments. Current law allows students to limit loan payments to 15 percent of revenue, debt forgiveness after 25 years of payments, although some students are aware of this option

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In a related move, the U.S. Department of Education, which now manages all federal education loans, is giving borrowers the option of consolidating federal and private loans at reduced prices.

“College graduates are entering one of the toughest job markets in recent times and we have a way to help them save money by consolidating your debt and the limitation of your loan payments,” said Education Secretary Arne Duncan in a conference call with reporters on Tuesday. “And we can do so without cost to the taxpayer.”

Even before the official presentation of the program at a ceremony in Denver, House Republicans challenged how the president could go forward without congressional approval.

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“The president is about to announce a major change in the program that we have not acted in the Congress,” said Rep. Virginia Foxx (R) North Carolina, who chaired an oversight hearing on Tuesday. “What authority does the department have?”

“I can not answer that question,” said witness James Runcie, the Department of Education Federal Student Aid Chief Operating Officer. “What that tells us to do in terms of implementation and enforcement, we will optimize and do what is in the best interest of borrowers and students.”

Part of the answer seems to be a move made by the Democratic-controlled Congress in March 2010. Ended taxpayer subsidies to private banks for student loans, which means that the Department of Education was solely responsible for the delivery of government money for such loans. That means 60 billion and ready to go to private banks for loans to students over the next 10 years is now tabbed for the Department of Education.

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Congress directed the Department of Education to use the savings to expand Pell grants for students from low and moderate income to attend college. However, many House Republicans, who still oppose the measure say that has made the Department of Education, one of the nation’s largest banks, largely unaccountable to Congress.

“This is another example of the Obama administration to make changes to federal education policy behind closed doors,” said committee spokeswoman Alexandra Sollberger Republican Party in an e-mail. “We are disappointed that the Department of Education opted out of the committee members before announcing the plan to the press.”

Republican critics also note that the Department of Education charges 6.8 percent for loans that cost much less, “the creation of a slush fund large enough for the government,” said Rep. John Kline (R) of Minnesota, who chairs the House Education and the workforce at the hearing on Tuesday.

The federal debt tabbed the “less than 1 percent” – giving a great benefit.

Education Department officials refused to do. “Right now Direct Loans reduce the deficit,” said Education Department spokeswoman Jane Glickman. “I would not call for bribes.”

The interest rate for 10 years taught in the department of the White House Office of Management and Budget (OMB), Ms. Glickman said in an e-mail. “In the market yesterday, the 10-year rate was between 2 and 2.5. The OMB projections, it is more like 3 in 2011.

The burden of some 1 trillion dollars in outstanding student loans – and even 500 billion just five years – is a hot topic in the occupied protest on Wall Street. Students who have difficulties with loans that can not afford to pay the penalty to the federal government to divest consumer protection

“Every major consumer protection has been specifically removed by our Congress, student loans,” says Alan Collinge at the site of the protest Zuccotti Park in New York on Sunday.

“It led to terrible results for borrowers,” he adds. “The political will to crack down there.”

President Obama said in a statement Tuesday: “Measures like these will not take the place of the bold action needed in Congress to boost our economy and create jobs, but will make a difference.”

Unlike the mortgage or credit card debt, student loans can not be eliminated through bankruptcy proceedings. With a sputtering economy, investment in the university does not always pay to students. In an interview on NBC’s “Meet the Press” Sunday, Republican presidential candidate Ron Paul called federal student loans a “failed program” because it allowed colleges and universities to inflate costs.

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