Students may be able to better understand the student loan and debt repayment process because of a new initiative to ease student loan debt processes.
On Wednesday, the Obama administration discussed efforts to better educate students about Income-Based Repayment, a proposal for a loan consolidation initiative and efforts to improve financial literacy tools.
The Consumer Financial Protection Bureau and the Department of Education have teamed up to create Know Before You Owe, an initiative that aims to help students better understand the amount and type of aid they qualify for. Know Before You Owe has created a “financial aid shopping sheet,” a one-page form detailing how much student loans will cost, what students’ loan and work study options are and how much students will owe after graduation. The project is part of the Department of Education’s efforts to provide information that will help students make decisions about where to attend and pay for school, and is a part of the CFPB’s initiative to bring transparency to the financial aid market.
“College graduates are entering one of the toughest job markets in recent memory, and we have a way to help them save money by consolidating their debt and capping their loan payments,” U.S. Secretary of Education Arne Duncan said in a statement. “And we can do it at no cost to the taxpayer.”
Know Before You Owe also offers a student debt repayment assistant. The assistant is an online interactive tool students can use to outline their options if they cannot make a full payment. It also provides information about income-based repayment, deferments and alternative payment programs.
The Obama administration hopes to better educate students about income-based repayment, according to a statement from the White House. The “Pay as You Earn” proposal will allow approximately 1.6 million students to cap their payments at 10 percent of their disposable income beginning next year, with their balances being forgiven after 20 years of payments, said President Barack Obama during a press conference.
Current law allows student borrowers to cap their loan payments at 15 percent of their discretionary income, with all debt forgiven after 25 years. The “Pay as You Earn” proposal will further ease student loan debt.
The Obama administration also plans to help students manage their debt by consolidating their student loans.
Many Americans today have separate payments, making them more likely to default. With the convenience of a single payment, borrowers are less likely to default. According to the administration, borrowers who consolidate will see a .5 percent reduction in the interest rate on some of their loans.
Know Before You Owe project creators are asking students across the nation to go to their website and comment on the draft financial aid form. CFPB and members of the Department of Education will use the feedback to improve the sheet before its official release.
“The process definitely takes a while, so a one-sheet form would definitely make things easier,” said journalism sophomore Brittoni Smith. “But I understand why it takes a while. There’s a lot of necessary information needed to determine who gets money.”
Printed on Thursday, October 27, 2011 as: National concerns arise over student debts
