As college tuition rates skyrocket across the country, it is no surprise that students are feeling the strain of higher education costs.
Tuition has increased an average of 5.6 percent each year beyond the general inflation rate during the last ten years, according to the College Board.
As the cost of college continues to rise, many students are forced to go deeper into student debt.
College graduates of 2010 graduated with a record level of student loan debt – an average of $25,250, according to CNN.
“A lot of times it can take students a year or more to become established in a job after graduation, let alone start making what might be massive student loan payments,” said Cait Walker, a senior exercise science major at Belmont.
In light of the grim statistics, the Obama administration is implementing a plan to make loan debt a bit easier for students.
The plan focuses on those who hold both government-backed private loans and direct-government student loans by allowing them to consolidate their debt into one government loan. This generally reduces interest rates by about 0.5 percent and means just one monthly payment for the borrower.
The second part of the plan will cap payments based on income.
Currently, borrowers can limit payments to 15 percent of their income, with any remaining debt forgiven after 25 years of payments. The new plan will allow payments to be limited to 10 percent of income, with remaining debt forgiven after 20 years of payments. The new income based repayment program begins in 2012, sooner than its original start date of 2014.
“The income based repayment is good because it allows you to get on your feet without having to freak out about your student loans,” Walker said.
However, Obama’s plan doesn’t provide relief to students with private loans, which tend to have higher interest rates and less government regulation in comparison to federally backed or direct government loans.
Federal loans have interest rates capped by law, currently at 6.8 percent, while private loans have variable interest rates and typically don’t offer the options of deferment or reduction of payments that federal loans do in times of financial hardship.
Cait Quindlen, a junior public relations student at Belmont, feels that while the changes being made are helpful to some, it is unfortunate that the changes still don’t apply to many students.
“Schools like Belmont with tight financial aid packages sometimes leave students with a choice to make. To attend the school that they want to, they have to take out private loans that don’t have options like income based repayment,” Quindlen said. “Federal loans are always better than private ones, but sometimes private loans are your only option, especially with the caps on federal loans.”
Although Obama’s new plan won’t be relevant to all students, it is a step towards debt relief for college students facing the price of an education that continues to become more costly.