MEMPHIS,TN--- Bottom line, college costs. Statistics show in the past few decades, tuition at private colleges has doubled, while costs at public colleges have nearly tripled! While some students are fortunate to earn scholarships, many rely on student loans.Financial experts say the average student graduates with about $20,000 in loan debt. But President Barack Obama wants to change who students borrow money from.
The President wants to get rid of Federal Family Education Loans, or FFEL. These types of loans are typically offered by private banks and lenders. In a White House statement released Friday, April 24, 2009, President Obama said, “ It's that under the FFEL program, taxpayers are paying banks a premium to act as middlemen -- a premium that costs the American people billions of dollars each year. Well, that's a premium we cannot afford -- not when we could be reinvesting that same money in our students, in our economy, and in our country.”
Instead the President wants to get rid of the middlemen and help people pay for college through the government’s Direct Loan Program. A move estimated to save $94 billion dollars over the next ten years. The money will in turn be used to expand and increase Pell Grants for students who need them most. University of Memphis student Adam Johnson says, “I think that’s something that would help me because I got three brothers and three sisters at the crib. So it’s kind of hard with me and my parents trying to pay back these loans as it is now.”
In terms of Pell Grants, President Obama says “We are adding $500 to the grants for this academic year, and raising the maximum Pell Grant to $5,550 next year, easing the financial burden on students and families.”
There is some relief out there for people who owe on student loans.
Under the Public Service Loan Forgiveness Program, which started last summer, a borrower’s debt will be forgiven if he or she works in public service full-time for 10 years. Fields include public safety, military service, social work, education, or non-profit. To qualify, borrowers must make 120 payments during the decade to the Direct Loan Program.
Borrowers can also look forward to the new Income-Based Repayment Program, or IBR, which kicks off in July 2009. Under “IBR” borrowers who qualify will have a monthly payment cap based on their income and family size. Monthly payments will be capped at 15 percent of monthly discretionary income. After 25 years of consistent payments, any remaining debt is forgiven.
