Obama’s new ‘Pay as You Earn’ loan plan could help students

President Barack Obama’s new plan aimed at easing the debt burden for college graduates might bolster his prospects for re-election.

Obama announced plans last week to restructure the payment of federal loans, making it more affordable for millions of students to attend college.

The proposal, called “Pay as You Earn,” is set to take effect in 2014.

It will reduce the amount that graduates have to pay toward their federal debt balance from 15 percent to 10 percent of their annual discretionary income.

In addition, all remaining debts will be forgiven after 20 years, instead of the current debt expiration point of 25 years.

This summer, the N.C. General Assembly cut funding to the UNC system by $414 million, including a $35 million decrease for its need-based financial aid program.

More students are turning to loans in the face of decreased grant aid, administrators said.

About 31 percent of UNC students took out federal loans last year, said Tabatha Turner, associate director of scholarships and student aid at the University.

UNC senior Porscha Armwood, who will have to pay back about $20,000 from student loans, said she thinks Obama’s policy will help graduates.

“You don’t want all of what you are working hard for to have to go back to pay your loans,” she said. “You will also have more money to put back into the economy.”

Michael Salemi, chairman of UNC’s economics department, said this plan will allow students to more confidently manage their budgets.

This plan could also have implications for Obama’s chances of re-election.

“Investments in education have always been a rubicon issue dividing the two parties,” said Terry Sullivan, an associate political science professor at the University.

As election time rolls around, both parties are looking to invigorate voters by giving them platform issues to rally around, he said.

Jim Stimson, a UNC political science professor, said the plan will solidify Obama’s support among college-age voters.

“More than winning that demographic — which he surely will — the more important consideration is generating enthusiasm and loyalty to a group that was necessary for his 2008 win.”

But UNC sophomore Jamie Phelps said he is worried that the debt not paid back by students will fall on taxpayers.

He also expressed concern that for-profit colleges, such as the University of Phoenix and DeVry University, will take advantage of the plan.

“I worry that it is going to be taken advantage of by some groups,” he said.

“Their students count for a disproportionate amount of federal aid, and students that attend these universities don’t tend to make as much money.”

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