President Barack Obama’s announcement this week that he will reduce student-loan payments comes as Americans are approaching one trillion dollars in student-loan debt and the number of people defaulting on their college loans is steadily rising. The College Board reported yesterday that higher-education costs, including for public universities, are at an all-time high.
But while the “Pay as You Earn” plan will make payments more manageable in the short term, graduates will end up paying more in the long run as interest accrues over a longer period of time, said a U.S. Department of Education spokesperson.
The president’s proposal, which amends the Income-Based Repayment initiative that President George W. Bush signed into law in 2007, allows for even lower monthly payments for up to six million graduates.
Obama and U.S. Secretary of Education Arne Duncan said they are also making efforts to provide more transparent information to families before they borrow money for college. The Department of Education created a website that shows the schools charging the highest tuition and those with the fastest-growing tuition.
Unlike the American Jobs Act, a bill that would allocate $60 billion for refurbishing schools and paying teacher salaries, “Pay as You Earn” is an executive order that doesn’t require Congressional approval.