Grad School Debt and Financial Aid Plans
Here’s a Quantitative Comparison question for you – which Quantity is greater?
Quantity A) Debt for all Post-secondary students
Quantity B) Debt for the entirety of all American consumers
The answer is: Quantity A) Debt for all Post-secondary students.
Astounding though it might seem, according to FinAid.org and FastWeb.com, the latest figures show that student debt weighs in at $850 billion and was expected to surpass $1 trillion by the end of 2011. The Federal Reserve reports that consumers currently owe $828 billion in credit card debt.
How is this possible? Well, as our President explained in a speech in Denver back in October, “Over the past three decades, the cost of college has nearly tripled, and that is forcing you, forcing students, to take out more loans and rack up more debt.” Obama offered up those words as he was introducing his new “Pay as You Earn” plan. This plan is aimed at decreasing the burden of student debt on students who struggle to meet the obligations of repaying their federal college loans. According to a White House press release, the plan proposes to cut students some slack by capping their required monthly payment at 10 percent of the borrower’s discretionary income while also taking family size into account. Given the current high unemployment rates, many students could benefit from the program.
The plan would also allow borrowers to transfer all Federal Family Education Loans (the private loans taken before July 1st, 2010) into the current Direct Loan plan, thus giving borrowers just one payment per month and reducing their interest rate by half of one percent.
Almost all current grad school students and most undergraduate students took out student loans under the old, bank-involved system and, as such, would be advised to transfer their old loans to the new Direct Loan plan if and when the program passes legislation.
Politicians are split on whether or not the Obama plan would help the overall economy. I suspect that many students would appreciate the relief they’d feel with fewer concerns about debt while they focus on their education. As someone who may be grappling with both undergraduate and potential graduate school debt, what are your thoughts on this topic?