Details Emerge on Obama Student Loan Plan

Posted: October 25, 2011 | Author: | Filed under: Barack Obama, Domestic Policy | Tags: , , | 4 Comments

Some details on the Obama Student Loan relief program have been released prior to the President’s speech on Wednesday in Denver.  The new program expedites changes that were not to take effect until 2014. It  adds a few more provisions including the ability to consolidate loans into the direct government plan.

The plan also would accelerate imposition of a cap on payments at 10 percent of income for some people with federal education loans by having it take effect next year rather than in 2014, Melody Barnes, White House domestic policy adviser, told reporters.

For some workers burdened by student loans the changes “could reduce their payments by hundreds of dollars every single month,” Barnes said.

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Under the loan proposal, people who have student loans through both the direct government loan program and the Federal Family Education Loan program would be able to consolidate what they owe into a single government loan with lower monthly payments and interest rates, Barnes said.

That could reduce by as much as 0.5 percent the interest paid by 5.8 million people, saving borrowers hundreds of dollars, she said.

The acceleration of the 10 percent income cap would affect an estimated 1.6 million borrowers whose type of loan and whose debt in proportion to income and family size makes them eligible for the federal student loan Income-Based Repayment Plan, according to a fact sheet released by the White House.

This program is aimed at reducing the number of defaulting loans that have now reached highs not seen since 1997.  Student loan debt has just reached 1 trillion dollars and rivals the level of credit card debt.

Going around Congress

Posted: October 24, 2011 | Author: | Filed under: Barack Obama | Tags: , , , | 13 Comments

It has been clear from the very beginning of the Obama administration that Republicans were out to make him a one term president and to tank just about any initiative he could possibly make.  It has amazed me that the President sought middle ground with folks that had pre-announced their intention to find none.  I could never figure out why executive orders were not flying out of the White House from the get go. It seems that re-election prospects and the economy are now registering as bleak enough to justify that strategy.

In a few short minutes, President Obama will announce a series of executive branch orders that will deal with refinancing mortgages and student loans. He’s in Las Vegas today which is undoubtedly home to  the worst of the housing crisis. The major problem recently has been with underwater mortgages.  The new loans will require no appraisal, no credit check, and you will not have have to be 90 days delinquent.  You can miss only one payment to qualify.  Evidently the new strategy is to move instead of wait for lawmakers.

According to an administration official, Mr. Obama will kick off his new offensive in Las Vegas, ground zero of the housing bust, by promoting new rules for federally guaranteed mortgages so that more homeowners, those with little or no equity in their homes, can refinance and avert foreclosure.

Interesting enough, I just was in Denver discussing a Philadelphia Fed study that showed how the current refinancing programs were actually encouraging default on primary mortgages.   Hopefully, this will reduce the time period between experiencing financial stress and getting relief for many home owners.

And Wednesday in Denver, the official said, Mr. Obama will announce policy changes to ease college graduates’ repayment of federal loans, seeking to alleviate the financial concerns of students considering college at a time when states are raising tuition.

The president’s announcements will bookend a three-day Western trip during which he also will hold fund-raising events in the two cities — both Nevada and Colorado are election battlegrounds — as well as in Los Angeles and San Francisco.

The “We can’t wait” campaign is a new phase in Mr. Obama’s so-far unsuccessful effort — punctuated until now by his cries of “Pass this bill!” on the stump — to pressure Republicans to support the job creation package he proposed after Labor Day. It comes after unanimous votes by Senate Republicans in the past week to block the plan; House Republican leaders have refused to put the measure to a vote.

There are two possible ways this can help.  First, it may keep homes from going to foreclosure and being placed on the market.  This could possibly slow down the price decline in the market which would stop forcing home values into the underwater condition.  Second, lower mortgage payments could keep people their homes and free up some income for other expenditures. The details of the student loan plan have not been announced yet but the President will be talking about it in Denver on Wednesday.   Let’s hope some of this works.  Better late than never.