WASHINGTON, D.C. (WISH) – President Barack Obama signed an executive order that should help college graduates working to pay off their loan debts.
“Lower tax bill for millionaires or lower student loan bills for the middle class? This should be a no-brainer,” said President Obama.
The President laid it out in a three step plan. He says it should be very simple. But, at least one local finance professor says this is no long term solution.
“I mean, it stresses me out but I’m trying to take it one day at a time and not really try to think about that at the moment,” said Hanna Sessler , IU student.
President Obama’s executive order will extend current loan payment caps to roughly 5 million more people who borrowed prior to 2007. That cap would be 10% of monthly income. It will also mandate renegotiation of contracts with private lenders like Sallie Mae.
“Here’s the problem. At a time when higher education has never been more important, it’s also never been more expensive,” said the President.
President Obama says over the last 30 years public tuition has gone up more than triple, but the average income has only risen by 16%.
“This is something that should be really straight forward. Just like the minimum wage should be really straight forward,” said the President.
On top of the President’s bullet points, the federal government will forgive existing debt if the student loan isn’t paid off in 20 years. U-Indy Professor Dr. Matt Will says all of this simply adds up to a transfer of wealth from established taxpayers to in-debt recent grads.
“Because what’s going to happen is, a lot of people will not pay their loans back and therefore the government, meaning the taxpayer, will pay it back for them. How many people will this impact? Well, there’s about 24% of the population that is currently under a provision similar to this and are not making payments on their loans,” said Will.
Will estimates this will cost the government 88 billion more dollars a year.
Another local financial planner from C.H. Douglas and Gray Wealth Management says this is a step in the right direction by making loans easier to pay. And as the wealthiest country in the world, we should be able to ensure that our youth get a secondary level of education.
Still, it’s expensive and getting worse. IU tuition and Notre Dame both raised tuition in 2013. Purdue approved a tuition freeze for the next two years added on to this year’s freeze.