New Plan Ties Reduced College Loan Payments to Income

New York Times ^ | June 29, 2009 | Jonathan D. Glater

[reaganaut1]

For the first time in years, there is good news for college students who borrow to pay for their education.

Starting Wednesday, the federal Education Department will begin offering a repayment plan that lets graduates reduce their loan payments, based on their income.

“We know today’s borrowers are concerned about their ability to repay student loans in the current economic environment,” Arne Duncan, the education secretary, said in a statement. “This new plan addresses the issue head-on by giving them the option of a reduced monthly payment tied to their annual income.”

Also on Wednesday, the interest rate on new federal Stafford loans, the most widely used federally guaranteed student loan, will drop to 5.6 percent, from 6.8 percent. By 2012, the rate will fall to 3.4 percent, under a schedule mandated by Congress.

The changes come as student borrowers face a difficult job environment and after many families have found it harder or impossible to use home equity loans to pay for college. Since the credit crisis, it has also become more difficult and more costly to obtain private student loans, which are not guaranteed by the government and which typically carry variable interest rates determined by borrowers’ credit histories.

“These benefits are guaranteed, no matter what happens in our economy, and are kicking in at exactly the right time for millions of Americans,” said Representative George Miller, Democrat of California and chairman of the House education committee.

...

The extended payment program, called “income-based repayment,” limits what borrowers have to pay to 15 percent of the difference between their gross income and 150 percent of federal poverty guidelines. After borrowers make payments on loans for 25 years, the balance is forgiven. (The Education Department already offered an “income-contingent” repayment plan, which was similar, but less generous.)

[reaganaut1]

Obama wants to push private lenders out of the guaranteed student loan program in part because he wants to "forgive" the loans of borrowers he considers "worthy". Limiting payments to "to 15 percent of the difference between their gross income and 150 percent of federal poverty guidelines" effectively increases the marginal income tax rate on some student borrowers by 15%. There is no mention of this program's cost to the taxpayer, of course.

[Rodebrecht]

“How many of you kids want to go to college? Well, Barack Obama and I are gonna make sure that happens for every one of you.” - “Slow” Joe Biden

[rahbert]

This is NOT FAIR!

Making us taxpayers come up with money to send other peoples
kids to school is not right period. Let endowments or private lenders do this.

Only govt grants for education should be GI Bill and those
grants given to med/dental students for extended military service or service in remote areas.

Asking me to support some poly sci major who is headed to
some Dem campaign staff is WRONG! I can’t even afford to
send my own kid to college, let alone someone elses.

[mojitojoe]

Making us taxpayers come up with money
____________
Think long and hard about that statement. When we fail to become taxpayers we will bring this corruption to a screeching halt. Until then, we have nobody to blame but ourselves. The future is in our hands.

[KarlInOhio]

Limiting payments to "to 15 percent of the difference between their gross income and 150 percent of federal poverty guidelines"

So that means that people who get degrees in Alternative Underwater Art History or Womyns' Stydies (can't have Studies because of the Stud) won't have to pay anything because they are permanently stuck below 150% of the poverty level.

[E. Pluribus Unum]

"From each according to his abilities, to each according to his needs."

"And we decide what your needs are."

[rahbert]

Erwin Schiff is still in prison if memory serves.

[BAW]

This is NOT FAIR!

We're paying the mortgage defaults, paying the unemployment, soon to be paying the credit card defaults, paying to buy fuel efficient cars . . and soon to pay the college too. It's the Obama Plan to level the playing field so that we all drop down to the lowest common level.

[slowhandluke]

So that means that people who get degrees in Alternative Underwater Art History or Womyns' Stydies (can't have Studies because of the Stud) won't have to pay anything because they are permanently stuck below 150% of the poverty level.

Exactly, another subsidy for the stupid and unproductive.

[BlackElk]

Let us not ignore where all that "borrowed" money is going. Forty years ago, a college teacher made, maybe, $25K per year to teach about 12 hours of classes per week for 30 weeks. That was more than many of them were worth. Today, there are two classes of teachers, tenure track and not. Those on tenure track can't be removed with a nuclear weapon once they have tenure no matter how abysmal their rasp of their subjectmatter or of the basics of teaching. They also liberally use graduate assistants to free Assistant Professor OHSOIMPORTANT from mere teaching responsibilities or grading tests or papers. Six figure salaries are no rarity today on the tenure track. Non-tenure track is wage slavery with no future.

Demonrats raise the grants and loans so that their pals on college faculties can prosper. Now they want everyone in the tax base to repay the loans so that more financially poor leftists will head for college, as though there were a shortage. Next will come courses in remedial alphabet and remedial finger-counting, along with the usual curriculum of mind-bending propaganda. If you have a college near you, it is also an organizing outpost for the radical left. There are verrrrry few exceptions.

[BlackElk]

Let us not ignore where all that "borrowed" money is going. Forty years ago, a college teacher made, maybe, $25K per year to teach about 12 hours of classes per week for 30 weeks. That was more than many of them were worth. Today, there are two classes of teachers, tenure track and not. Those on tenure track can't be removed with a nuclear weapon once they have tenure no matter how abysmal their rasp of their subjectmatter or of the basics of teaching. They also liberally use graduate assistants to free Assistant Professor OHSOIMPORTANT from mere teaching responsibilities or grading tests or papers. Six figure salaries are no rarity today on the tenure track. Non-tenure track is wage slavery with no future.

Demonrats raise the grants and loans so that their pals on college faculties can prosper. Now they want everyone in the tax base to repay the loans so that more financially poor leftists will head for college, as though there were a shortage. Next will come courses in remedial alphabet and remedial finger-counting, along with the usual curriculum of mind-bending propaganda. If you have a college near you, it is also an organizing outpost for the radical left. There are verrrrry few exceptions.

[08bil98z24]

Making us taxpayers come up with money to send other peoples kids to school is not right period.

I receive financial aid to help with my school bills.

Since the federal government has created a society in which one must have a college degree to get anywhere in life ... I see nothing wrong with receiving Student Loans. They are LOANS after all.

Everyone should have the same interest rate however ...

I'd much rather MY tax payer money go to students who need money and want to better themselves, than say tax money going to the people of Pakistan.

If it was easier to get a job without 50 million job requirements, including needing a degree to work in a lousy factory ... nobody would have to go to college. But since it is not like it used to be, and EVERY AMERICAN from generations past is to blame ... I do not see what the argument is.

Taxes are high because of stupid things our government does ... I can find 900 other stupider things tax money is spent on other than school ...

Taxes have been around since the days of our Founding Fathers. What is new however, is the fact that Taxes now take a a good chunk from everyone's pocket.

FYI, it is almost impossible to get money from private lenders for school.

[SunkenCiv]

Starting Wednesday, the federal Education Department will begin offering a repayment plan that lets graduates reduce their loan payments, based on their income.

[Red Boots]

I can’t even afford to send my own kid to college, let alone someone elses.

I'm in the same boat. I don't want to apply for financial aid because what is that but a transfer payment from someone else ? Who then can't send his kid to college.

I also don't want my son to have to go to camp o to get a loan.

[dano1]

There is a short animation on their website that explains more about the program here:

http://www.ibrinfo.org/

[nascarnation]

ACORN membership gives an automatic free pass.

[dano1]

If I am reading this correctly, this is an unbelievably huge Federal giveaway!!!

They are saying that the program applies for past, present and future student loan borrowers.

They are also saying that if your income is low enough, your loan payment will be zero.

So why wouldn’t anyone who is currently stuck in a low paying job just borrow money and live on student loans at Federal taxpayer expense for the next few years, or maybe up to the next six years at one of our country-club like college campuses?

For example, say someone graduated from high school and has been working at WalMart for the last few years making near minimum wage. Wouldn’t that person be crazy not to quit and go run up $100,000 of student loan debt pursuing some pipedream degree at on a pleasant college campus? How could you lose? At worst, when you graduated you could just go back to your old job and let the taxpayers eat the bill.

Basically, it lets everyone get out of work for free for a few years by gambling on the taxpayers dime.

It’s the typical Obama “heads-I win, tails you lose” bailout strategy.

Watch the infomercial animation at http://www.ibrinfo.org/

[dano1]

"I don't want to apply for financial aid because what is that but a transfer payment from someone else

This program makes a sucker out of everyone who worked to pay their way through school or went to a less prestigious or less fancy school to avoid running up excessive debt.

[PapaBear3625]

If the college can't turn out somebody who can pay off their loans, then the college has done a crappy job.

Tell you what: lets have colleges issue student loans from out of their own endowments, They will become MUCH more selective in who they let in, and much less tolerant of financing people who major in basket weaving.

[dano1]

"Since the federal government has created a society in which one must have a college degree to get anywhere in life..."

Education is important, but this is not the way to do it. For one thing, colleges set their prices based on what they know students can afford. So once the university administrators calculate that students can borrow with less risk, the administrators can raise prices with even more impunity.

In the end, it just means a bigger Federal subsidy to our already bloated universities.