President Barack Obama is set to unveiled "Pay As You Earn" proposal on Wednesday, a plan to reduce the burden of student loans on college graduates as the amount of debt for higher education surges.
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Obama Set To Unveil Student-Loan Plan |
Under the changes, students with loans issued by private banks and the government will be able to consolidate the two types of loans into a single government loan with a lower interest rate.
In addition, Obama will also speed up changes that will cap a graduate’s annual federal student loan repayment at 10% of his or her income. The reforms, now due to go into effect next year, had been scheduled to take effect in 2014. The student loan program is particularly popular with key Democratic constituencies. The issue is of great concern to young people, who make up an important part of Mr. Obama's political base.
Based on consumer credit data released by the Federal Reserve, the federal government’s student loan program has risen to $392 billion in August 2011 from $107 billion in the same month in 2008, according to an estimate by Troy Davig, an economist at Barclays Capital.
Students can still obtain private loans for colleges. Abernathy said there is little public data about the private student-loan market but said that more than $20 billion in student loans were being made annually at the peak of the market before the financial crisis.
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