Current Date: Fri, 14 Mar 2014 14:03:22 -0400
Although President Barack Obama’s new federal student loan repayment system recently went into effect, it will likely only begin to affect students next year.
The new pay-as-you-earn system limits student loan repayments to 10 percent of a person’s income, compared to 15 percent under current law. It also forgives the balance of students’ debt after 20 years of payments.
Jenna Robinson, director of outreach for the right-leaning John William Pope Center for Higher Education Policy, said the program will only affect students who have taken out a loan in 2012 or later — meaning it will only begin to affect people next year.
Robinson said that, while the program will provide some relief to students, she is worried about the precedent it sets for colleges, which might be more willing to increase tuition if students have more loan payment options.
She said students who obtain a low-paying job after college might lack ambition if they know a higher income will translate into more loan payments.
“It may have some discouraging effects on how graduates approach their career,” she said.
But Kate Matthews, co-president of the UNC’s chapter of the Roosevelt Institute, said the program will allow many students to receive a higher education without being deterred by the cost.
She said the program also provides relief for graduates who want to work in low-income positions, such as nonprofit or public service work.
“They can pursue the career they are passionate about without worrying about being able to pay off student loans,” she said.
Terry Sullivan, associate professor of political science at UNC, said the timing of the program’s implementation, right before election day, probably was not for political reasons.
He said the program’s implementation date is due to the timing and processing of executive orders, rather than political motivations — though many students who came out and voted for President Obama might have done so out of self-interest as well as his positive message, he said.
It is too early to determine how much the new rules will affect former UNC students, said Phil Asbury, deputy director of the Office of Scholarships and Student Aid at UNC.
He said eligibility for this program begins for most students after their life as a student at UNC.
“Any time that flexibility in repayment is enhanced, we consider that to be a good thing,” he said.
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