newjerseynewsroom.com

BY TOM HESTER SR.

NEWJERSEYNEWSROOM.COM

More than 71,000 New Jerseyans with outstanding college loans would be able to reduce their interest rates and simplify their payments by consolidating their loans under President Obama’s effort to lower loan costs, the White House said Wednesday.

And more than 2,000 current New Jersey college students would be able to lower their monthly loan payments through a proposed “Pay as You Earn” program, the White House added.

The estimates were offered as the Obama administration announced it is attempting to take steps to increase college affordability by making it easier to manage student loan debt. The announcement is part of a series of executive actions to put Americans back to work and strengthen the economy “because,” the White House said, “we can’t wait for Congressional Republicans to act.”

The administration is moving forward with the “Pay As You Earn” proposal that would reduce monthly payments for more than 1.5 million current college students and borrowers. Starting in 2014, borrowers would be able to reduce their monthly student loan payments to 10 percent of their discretionary income.

The White House said Obama realizes that many students need relief sooner. The new “Pay As You Earn” proposal would allow about 1.6 million students the ability to cap their loan payments at 10 percent starting next year, and the plan would forgive the balance of their debt after 20 years of payments. Additionally, starting in January an estimated 6 million students and recent college graduates would be able to consolidate their loans and reduce their interest rates.

“In a global economy, putting a college education within reach for every American has never been more important,” Obama said. “But it’s also never been more expensive. That’s why today we’re taking steps to help nearly 1.6 million Americans lower their monthly student loan payments. Steps like these won’t take the place of the bold action we need from Congress to boost our economy and create jobs, but they will make a difference. And until Congress does act, I will continue to do everything in my power to act on behalf of the American people.”

“College graduates are entering one of the toughest job markets in recent memory, and we have a way to help them save money by consolidating their debt and capping their loan payments. And we can do it at no cost to the taxpayer,” U.S. Secretary of Education Arne Duncan said.

Current law allows borrowers to limit their loan payments to 15 percent of their discretionary income and forgives all remaining debt after 25 years. However, few students know about this option. Students can find out if they are currently eligible for IBR at www.studentaid.ed.gov/ibr.

Last year, Obama proposed, and Congress enacted, a plan to further ease student loan debt payment by lowering the IBR loan payment to 10 percent of income, and the forgiveness timeline to 20 years. This change is set to go into effect for all new borrowers after 2014 -- mostly impacting future college students.

Obama is proposing to offer more immediate relief to many current college students by giving them the chance to limit loan payments to 10 percent of their discretionary income starting in 2012. In addition, the debt would be forgiven after 20 years instead of 25, as current law allows.

For many who struggle to manage their student loan debt – including teachers, nurses, public defenders and others in lower-paying jobs – these proposed changes could reduce their payments by hundreds of dollars each month. Overall, the proposal would provide an estimated 1.6 million borrowers with more manageable monthly payments.

State Senate Republican Leader Tom Kean (R-Union) offered comments on Obama's proposal.

“The very difficult economic environment that has persisted during President Obama’s tenure demands that extraordinary measures be taken to ease the burden of students unable to find employment," Kean said. "The president’s proposal to permit students to consolidate loans from the federal government, at lower interest rates is worthy of consideration in these difficult economic times and could provide some relief to struggling graduates.

“Of course, this measure is not a substitute for a focused and coherent economic strategy, something that the Obama administration has been unable to articulate," the senator said. "The president, more than anyone else, should understand that people are not repaying their school loans because they cannot find a job. Recent graduates are among the hardest hit groups as record unemployment continues under the Obama administration. Effective, meaningful job growth is the only way to ensure that Americans can get back on their feet and out of debt.

“Additionally, I am still concerned by the proposal that would authorize private debt collectors to call the cell phones of people delinquent on student loans and other debts owed the federal government," Kean said. "Invasive phone calls are not the answer. I plan to introduce a resolution, in the state Senate, urging our congressional delegation to use their influence to put a stop to the Obama administration’s intrusive debt collection proposal. I will call upon my colleagues, on both sides of the aisle, to support this common-sense resolution."

The Obama administration is planning to offer student borrowers the chance to better manage their debt by consolidating their federal student loans. Approximately 5.8 million borrowers have both a Direct Loan (DL) and a Federal Family Education Loan (FFEL) that require separate payments, which makes them more likely to default. To address the needs of these borrowers, the administration would allow borrowers the convenience of a single payment to a single lender for both loans. Borrowers who take advantage of this consolidation option, which begins in January, would also receive up to a 0.5 percent reduction in their interest rate on some of their loans, which means lower monthly payments that would save hundreds of dollars in interest. Eligible borrowers would be contacted by their federal loan servicer early next year with information on how to consolidate.

The changes carry no additional cost to taxpayers.