President Obama announces plan to reduce student loan debt - Fox 28: South Bend, Elkhart IN News, Weather, Sports

President Obama announces plan to reduce student loan debt

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President Barack Obama announced several proposals for student loan reform Monday afternoon. First, he employed a presidential memorandum in order to expand an alternative salary-based financing option which caps out at 10 percent of monthly income. Students and graduates who took out a loan before October 2007 - an estimated 5 million people - were previously not eligible for this plan.

Obama also endorsed a Senate bill to allow an estimated 25 million people with older loans to refinance at lower interest rates.  

"Everybody has loans," said Goshen College senior Tasha Friesen, 21. "I don't think I know anyone who went through school and didn't have any loans."

Friesen and her friends represent an accurate sample of the average Indiana college student. More than 64 percent of students in this state will graduate with debt. The average college student in Indiana graduates with $27,886 in debt. 

"70% of our students at Goshen College borrow loans from the federal government," said Joel Short, Director of Financial Aid at Goshen College. Short normally advises students not to extend the length of a federal loan, and instead to pay loans back as soon as possible. However, he thinks salary-based plans will help graduates living paycheck to paycheck.

"This type of payment plan, making sure that you're able to make payments is much better than defaulting on loans or not being able to pay anything," said Short.

"To be able to extend that to students who borrowed before 2007," said Ivy Tech Community College Elkhart Campus President Julie Foster. "Or who haven't borrowed since 2011, I think is really important because there are a lot of people struggling to make those minimum payments."

For Foster, student loan reform is personal. She's still paying back her loans from law school. She graduated in 2001, so she's stuck with higher interest rates than those currently available for graduates with her credit history. Foster isn't alone. If passed, the Senate bill would help an estimated 25 million Americans.

In the meantime, the new eligibility requirements for the 10-percent monthly income plan will take affect December 2015.
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