Obama to reduce student loan debt payments
The president will cut to 10% the maximum percentage of income that students will have to pay on their loans. Similar measures passed by Congress were not due to go into effect until 2014.
By Alexa Vaughn, LA Times Washington Bureau | http://lat.ms/uJzeEI
October 25, 2011, 8:08 p.m. - Reporting from Washington— President Obama will make student loans easier to repay for millions of borrowers without adding to the national deficit, his administration said Tuesday.
Bypassing an uncooperative Congress, Obama will, by executive order, reduce to 10% the maximum percentage of income that 1.6 million current students will have to pay toward their student loans. They will also be eligible for loan forgiveness in 20 years instead of 25.
He will also allow at least 6 million people with different types of federal student loans a chance to consolidate them into one while reducing their interest rate by a half percent starting in January.
Congress passed similar measures last year, but they are not set to go into effect until July 2014.
"We know, during a time of struggle, families are borrowing more," said Melody Barnes, director of Obama's Domestic Policy Council. "We're trying to lift the burden off them so they can continue to meet their obligations."
Barnes said that burden was being lifted at no cost to taxpayers because of student loan restructuring that lowered the cost of government loan subsidies this year.
Obama will publicly introduce the policies Wednesday in an appearance at the University of Colorado campus in downtown Denver.
Along with the new policies, Barnes said she hoped the campaign also reached people who weren't taking advantage of the current income-based repayment plan, which requires borrowers to pay a maximum of 15% of their incomes. Out of 36 million Americans with student loan debt, only 450,000 have taken advantage of it.
In an example of what the savings will be per month, a nurse who is earning $45,000 a year while paying back $60,000 in federal student loans would pay $690 a month under the standard repayment plan, according to the White House statement. If the nurse took advantage of the current 15% income-based payment limitation, the nurse's monthly payment would drop to $358. Under the Obama plan, someone who graduates next year and is earning the same amount would pay $239 a month.
Unemployed students can pay interest only or defer payments, but the loan still accrues interest during the deferral period.
Barnes said Obama was using executive authority to push the proposals forward because "we cannot wait for congressional Republicans to act."
California leads nation in escalation of college costs
California's public universities enacted the highest average tuition increase, 21%, of any state, the College Board finds. Steep state funding cuts to higher ed were significant factors in pushing up tuition and fees nationwide.
By Larry Gordon, Los Angeles Times | http://lat.ms/s9Etmb
Cal students pass through Sather Gate at UC Berkeley. (Christopher Reynolds / Los Angeles Times)
October 26, 2011 - Steep funding cuts to higher education in California and elsewhere were significant factors in pushing average tuition and fees up 8.3% at four-year public colleges and universities nationwide this fall, according to a report by the nonprofit College Board.
California's public universities enacted the highest average tuition increase, 21%, of any state, the annual study on college costs found. The state enrolls a tenth of the nation's public four-year college students.
But even excluding California, tuition prices at such colleges rose significantly nationwide this year, an average of 7%, the College Board found. Apart from California, Arizona and Washington had the highest rates of tuition increases at public four-year campuses, 17% and 16% respectively, while Connecticut and South Carolina were lowest, at 2.5% each.
Sandy Baum, a policy analyst for the College Board, said the recession's toll on tax revenues prompted some states to slash higher education funding. "California seems to be the leader of that" trend, she said.
Yet the study also showed that significant increases in federal grants and tax credits are shielding many students from some of the tuition pain even as unemployment is driving more people to enroll at colleges. "As the states have stepped back, the federal government to some extent compensated for the higher prices," Baum said.
Nationally, in-state tuition and fees at public four-year colleges and universities average $8,244 for this school year. With room and board, the average cost of such schools is $17,131, up 6% from last year, said the report, which is being released Wednesday.
Even with steep hikes, the Cal State system's tuition and fees total $6,521, still below the $7,186 national average for similar master's degree campuses. UC's tuition and fees figure, about $13,200 this year, is well above the national average of $9,185 for doctorate-granting institutions, although UC leaders say it is on par with other top public colleges.
At California's community colleges, this year's 37% tuition jump was the steepest percentage increase in the nation, but actual tuition and fees remain the lowest — $1,119 compared to an average of $3,288 for two-year colleges in the rest of the country.
Meanwhile, the nation's private nonprofit four-year colleges raised tuition and fees 4.5% this year, to a national average of $28,500. With room and board, the price tag averaged $38,589, up 4.4% from last year.
Critics of college pricing have long complained that tuition rises much faster than inflation, which was 3.6% for the year ending in July, and that schools should try harder to rein in costs. In the last decade, the percentage growth has moderated somewhat at private schools, averaging 2.6% above inflation annually, but has risen faster than in recent decades at public four-year schools, to 5.6% annually above inflation.
Patrick Callan, president of the Higher Education Policy Institute, a San Jose-based think tank, said universities still resist efficiencies, especially in adopting new technology and persuading research faculty to teach more classes. "There is a real lack of serious attention to productivity and innovation," he said.
Baum and other experts noted that the actual cost for students often is much lower than a college's sticker price. Grants and federal tax benefits averaged $5,750 for students at public four-year colleges and $15,530 for those at private nonprofit schools, according to a financial aid study also released by the College Board.
But even as the number and size of federal Pell Grants for financially needy families increase and more people are eligible for tuition tax credits, the report said, complex aid policies "make it difficult for many of those who most need the help to understand and navigate the system."
The study showed increased reliance on loans, especially those backed by the federal government. About 56% of students who earned bachelor's degrees at public colleges in 2009-10 graduated with debt, with an average burden of $22,000. At private nonprofit schools, 65% of graduates had loans, with an average debt load of $28,100.