Scholarship News

Obama's Student Loan Plan: What's in it for you?


June 10, 2014
by Suada Kolovic
The financial aid process can be a daunting one but if you're planning on attending college any time soon, you should know that there are tons of federal student aid options available. From Pell Grants to Perkins Loans to FAFSA, the funding is out there but your eligibility to receive aid depends on your level of need and, subsequently, how much aid you are eligible to receive. Translation: For the majority of students, loans are inevitable. But don't fret just yet because President Obama announced an executive order capping loan payments: In an attempt to ease heavy college debt, millions of student loan borrowers will soon be able to cap their payments at 10 percent of their monthly income.

The financial aid process can be a daunting one but if you're planning on attending college any time soon, you should know that there are tons of federal student aid options available. From Pell Grants to Perkins Loans to FAFSA, the funding is out there but your eligibility to receive aid depends on your level of need and, subsequently, how much aid you are eligible to receive. Translation: For the majority of students, loans are inevitable. But don't fret just yet because President Obama announced an executive order capping loan payments: In an attempt to ease heavy college debt, millions of student loan borrowers will soon be able to cap their payments at 10 percent of their monthly income.

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According to the administration, this action will help up to 5 million more borrowers but will not be implemented until December 2015 at the earliest. And while some students taking out loans can already cap their loan payments at 10 percent of their incomes, the president's order will extend this ability to students who took out loans before October 2007. (It’s important to note, however, that President Obama's executive order would cover only those loans from the federal government, not private financial institutions.) "The past couple of years, we've done future students, we've done current students, and now we're trying to take a step back," Education Secretary Arne Duncan told reporters Monday. Duncan went on to explain that the expansion of the payment caps would be "fantastic for the economy" by allowing young people to spend or invest that money elsewhere. (For more on this story, click here.)

What do you think of the president's attempt to ease the financial burden associated with student loans? Let us know your thoughts in the comments section. And for more information on federal funding, visit our Financial Aid section.

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Alexis B  on  6/18/2014 12:57:15 PM commented:

This is maybe not the best option but it does offer some help. Students, once graduated, need to remember to increase payments as thier income gorws. That is the key to getting out of this debt sooner and with minmal interest penalties.To pay only the nimimum while your salary grows is really an unwise choice overall.

jennifer t  on  6/11/2014 1:31:30 PM commented:

This is somewhat cool I guess

Shari E  on  6/10/2014 9:47:11 PM commented:

This policy is not really helping students. Capped payments that likely won't cover accumulating interest, much less principle, are only kicking the can down the road. Sure, graduates will have a little more money in the short run but they are signing up for a lifetime of indebtedness because the years of accumulated interest will eventually come due. More needs to be done to teach kids that they can have an education without relying on loans. Working and saving might increase the time it takes to get a degree, but it will save the student many more years that will otherwise be spent repaying loans with interest.

Rae O  on  6/10/2014 7:33:24 PM commented:

This will help many college graduates like myself. The daunting task of repaying a loan for an education has not been made easier.

Mark W  on  6/10/2014 5:05:27 PM commented:

To me, this plan is unfair to those who have sacrificed and saved and ended up paying full freight. Why do those who have done it the right way, in essence, get penalized? So now, those who get relief can spend money elsewhere to aid the economy? What about those who saved for college and could not spend elsewhere. This is another government scam.

Sherry B  on  6/10/2014 4:43:52 PM commented:

I personally had the opportunity to speak with vice president Baden back in October of 2013, in which, the question was raised about future students having to pay back their student loans. Vice president Baden told us what the pros and coins would be in their attempt to ease the burden of students repaying the money that they had borrowed, so basically, this is not shocking news for me. Granted the fact that he mentioned the downside would be how long it would take to pay off the student loans would be the same as a thirty year mortgage, but it is sad to say that sometimes you have to take the good with the bad. "You must choose from the lesser of the two evils", quoted by Socrates. I believe the Obama administration as good intentions for college students and they have opened the door for future ideas on this dilemma. For those that think the federal government is the one that raises college tuition, YOU ARE WRONG, believe it or not, it is the state that raises your tuition. If you want to have a voice, write your governor with your concerns, make a petition to free the cost of tuition, if you don't step and take action, then don't complain about the cost. You have the power to make a change in our college future!

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FAFSA is an acronym. It stands for Free Application for Federal Student Aid. Please take note that the first word in the acronym is Free. You do not need to pay to fill out the FAFSA but there are certainly websites out there that will charge you for their assistance. If you are asked for a credit card at any point in the process, you are at one of these sites. If you do not want to pay to complete the FAFSA, be sure to apply at https://studentaid.gov/h/apply-for-aid/fafsa. The FAFSA must be completed by you and your family each year if you wish to be considered for need-based grants from the college or university you are or will be attending as well as subsidized student loans.

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