Imagine graduating from college, thousands of dollars in debt from loans, no job or a job that does not pay well. Unfortunately, this is the case for many students. Approximately half of the country’s new graduates were either unemployed or underemployed in 2011, according to an April 2012 ABC article by Rudabeh Shahbazi.
More than 37 million Americans owe student debt, and a majority of these students took out loans to finance their college educations, according to an August 2012 article entitled ‘President Obama, Mitt Romney Address College Financial Aid, Student Loans On Campaign Trail’ by Tyler Kingkade in the Huffington Post. With the student debt reaching a record breaking $1 trillion, something must be done to improve student funding without ‘breaking the bank.’ Some of us are wondering how we are going to pay our debts when we graduate, while other students are concerned with how they are going to be able to finance next semester’s cost. Because of this, it is important for students to be aware of the policies being pushed by the presidential candidates.
Romney on Student Aid and Loans:
“A flood of federal dollars is driving up tuition and burdening too many young Americans with substantial debt and too few opportunities,” said Mitt Romney in his white paper “A Chance for Every Child.” Romney openly admits that students should not expect him to boost Pell grant awards or help pay off student loans. He explains that even though it is very tempting for politicians to promise more money when asked, Romney explained he would not lie to the public. He also said that giving students more money would only be taking money from your pocket and giving it to the other, according to Kingkade’s article in the Huffington Post.
What he means by this is that if more federal grants were allowed, the people themselves would ultimately finance the program. Romney added, “I’m not going to promise all sorts of free stuff that I know you’re going to end up paying for. What I want to do is give you a great job so you’ll be able to pay it back yourself. And I want to get the government off your back, so you can keep more of what you earned,” said Romney.
The problem with this, critics say, is that many students would otherwise not be able to afford to pursue the careers they wish. The Ryan budget would cut Pell benefits, eligibility, and freeze the maxi¬mum grant at $5,550 per student per year, apparently on a permanent basis, writes the Center on Budget and Policy Priorities. Romney believes that this could help in the long term by making students more aware of the debt they incur when they go to college.
“Hey, I’ll loan you more money,” Romney said earlier this month according to ABC News and Emily Deruy. “Here let’s loan you — I don’t want to overwhelm you with debts. I want you to make sure you can pay back the debts you’ve already got and that will happen with good jobs and that’s why my five-point plan to get 12 million new jobs in this country is the best thing I can do for you and for the students of America.”
Romney also has a reform program called “A Chance for Every Child.” In his white paper, he explains that he does not want to spend more borrowed money, like he accuses the current administration of doing. He expresses that he wants to consolidate duplicative and overly complex programs within the Department of Education. He also explains that he wants to focus on giving students and families with financial need proper information about schools they wish to attend, thus educating them about future earnings and loan repayment rates, allowing them to weigh the risk and benefits of attending the schools students choose.
Obama on Student Aid and Loans:
“Earning a post-secondary degree or credential is no longer just a pathway to opportunity for a talented few; rather, it is a prerequisite for the growing jobs of the new economy,” according to the official White House website, Whitehouse.gov. Because of this, initiatives have been taken in order to make school more affordable. In the past four years, President Obama has doubled the student Pell grant from 16 to approximately $30 million. According to his website, he also claims that by doing this, more people will be eligible for a Pell grant, thus helping them with their college cost.
Obama is also proposing the ‘Know Before You Owe’ program, which is essentially a form that will include the average loan default rate and will also differentiate between grants and scholarships, allowing students to know exactly what they will be paying, according to the Consumer Financial Protection Board and the U.S. Department of Education. The form would be introduced as a universal Financial Aid document that all colleges would be urged to adopt by the year 2013-14, if approved. This would allow students to see what they are being offered and how much they could possibly pay, before they accept the college’s offer.
Also, Obamas ‘Pay As You Earn’ program, which came into effect this year, caps monthly federal student loan repayment at 10 percent of monthly income. In essence, what this means is that students will not have to struggle to pay their federal loans. With this program, the federal student loan is capped at 10 percent of your monthly income. This is so students have more money to spend and invest in the economy, thus improving it, according to Barackobama.com, President Obama’s re-election site. Also, in this program, a student can choose the college they want to attend based not only the price of tuition, but on their career goals. He also has an education calculator on his website where students can calculate how much they can pay for school based on what career they choose.
This segues into Obama’s proposed loan forgiveness program. Also, according to Obama’s site, “If you are a responsible borrower and make 20 years of on-time payments, your remaining debt will be forgiven. If you are in public service, like teaching, nursing, or serving in the military, your remaining debt will be forgiven after 10 years of on-time payments.”
“The Student Loan Forgiveness Act of 2012, introduced to the House by Representative Hansen Clarke (D-Mich.), would reduce the debt of students who have already repaid a substantial portion of their loans over the past decade.” according to an article in June of 2012 in the Huffington Post by Gregory Kristof.
According to hansenclarke.house.gov, if the act is passed, the amount of forgiveness will have a cap for new borrowers, and none for those that took out federal loans before the act would go into effect. According to The Student Loan Forgiveness Act of 2012 F.A.Q, the act has an approximately $45,000 cap for new borrowers to incentivize students to make cautious financial decisions while encouraging colleges and universities to lower the cost of their tuition. The Act aims to stimulate the economy by relieving students of their financial debt, thus increasing the amount of available income students have to spend and invest in the economy.
What Romney and Obama Agree on:
What Obama and Romney do agree on is the extension of the dis¬counted interest rate on subsidized federal loans. The Stafford loan was set to increase from 3.4 percent to 6.8 percent on July 1st for unsubsidized and subsidized loans. With both of their cooperation, the current Stafford loan has remained at a 3.4 percent for subsidized rates and at 6.8 for unsubsidized and graduate rates according to Staffordloan.com, which are in effect until 6/30/2013.
The issue of loans and education financing is an important one to college students. The candidates have different positions. The choice is ours. Vote 2012