President Obama announced his newest executive order to help reboot the struggling economy last week. He is making changes to federal policy to make student loans more affordable and easier to pay back for recent college graduates who are struggling to find work after graduation.
With college tuition growing each year, it is a relief to most students that this is happening. The “Know Before You Owe” plan was originally an initiative to help with mortgages, but the same principles are being used for student loans.
This order was announced at the University of Colorado to thunderous applause from college students. This plan would allow students to repay at a slower rate and consolidate multiple payments into one payment with a better interest rate. Obama also plans to cap student loan payments at 10 percent. The plan is actually an acceleration of a federal law due to take effect in two years, but because of the executive order it will begin in January 2012. Also under the new rule, after 20 years on federal loans, the remaining debt would be forgiven, five years earlier than the present system.
Obama believes a college education is essential. “In a global economy, putting a college education within reach for every American has never been more important, but it’s also never been more expensive,” he said.
One of the major concerns of enacting such an order is to free up more money for students upon graduation. The hope is with more money to spend, recent graduates can put more money into the economy and help get it going again. Obama said, “And when a big chunk of every paycheck goes towards student loans instead of being spent on other things, that’s not just tough for middleclass families, it’s painful for the economy and it’s harmful to our recovery because that money is not going to help businesses grow.” He explained that the best part of the entire plan is that there is no additional charge on taxpayers.
However, some Republicans, especially presidential candidate, Michelle Bachmann, see this as an abuse of power. Recently as the economy continues to fail, the Congress and President have not been seeing-eye-to-eye. Bachmann believes that Obama is getting tired of waiting and is using his executive order powers to try and get the economy moving again.
During an educational forum last Wednesday, Bachmann said, “There is a morality in keeping our financial promises, and I don’t think we should push that off onto the taxpayer. The individual needs to repay and be responsible for repaying their student loan debt.” Newt Gingrich also agrees with Bachmann calling it a “Ponzi scheme.”
However, Gingrich offers a solution. He states that federal loans should be privatized. The Obama administration said it could actually save the government up to two billion dollars a year because it would be a direct loan under the Federal Family Education Loan Program.
University sophomore Adam Sharkey does not have much faith in anyone to do the right thing in government. Sharkey said, “While I trust Obama more than
I trust the collective Congress, I still do not believe that he has the knowledge to understand the damage that even spending one dollar today has on the national debt.”
He also believes this does not help students or the debt crisis the government must solve. Referring to the executive order, he said, “This is not a victory, it is a postponement of failure.”
Sharkey suggested that perhaps Obama passed this order to help in his reelection campaign. As Occupy Wall Street continues to make national headlines, one of the major pedestals of the protest is the amount of students in debt and out of work.
Obama motivated and involved thousands of young people in his run to the White House last election, and some believe he is trying to tap that resource once again by issuing this order.
