Obama proposes reforms for college
By Devon Beck
President Obama included a student loan reform in his budget proposal on April 10 to deal with the growing issue of affording college and paying off loans.
According to USD, the average cost to attend school here is $53,302 per year. Many students at USD rely on financial aid to help cover the high cost of attending the university.
As the cost for attending college has risen over the years, it has become more difficult for graduates to pay off loans. This issue has been gaining a lot of attention and Obama has proposed a student loan reform program in order to address the concerns of parents and students alike.
The first part of Obama’s proposal would fully fund Pell Grants through the 2015-2016 award years. Pell Grants are important in ensuring that low-income students can go to college, and are important since they do not have to be repaid. The new proposal would increase the maximum award from $5,550 to $5,785.
The proposal also contains plans to increase grant and federal work-study opportunities, which would limit the amount of money students need to borrow in loans. The goal would be that the more students who benefit from this aid, the less they would have to borrow in loans.
Obama’s proposal also addresses loans, which is a main concern for graduates trying to pay off their education. The new proposal would prevent Direct Loan rates from increasing from 3.4 percent to 6.8 percent.
According to The Chronicle of Higher Education, student groups argue that there are also negative outcomes to the proposal. The proposal removes the cap on interest rates, so for future federal loans, the rate could rise, making loans and college less affordable to students who need to borrow money. Instead of having a cap, no borrower would pay more than 10 percent of their income and the loan would be forgiven after 20 years. Not having a cap also means that borrowers who attend college when the rates are high could end up paying more than those who attend college when the rates are lower.
Lastly, critics of the proposal argue that fixing a rate over a life loan is not a permanent solution to the student loan crisis.
Sophomore Karen Mejia had mixed feelings about the proposal.
“Obviously it would be nice for interest rates to go down especially for students who have subsidized and unsubsidized loans,” Mejia said.
She added that there were also negative aspects to the proposal.
“It seems that it would only solve the problem for a small window of time; then when the interest rates increase later on, it might create an even bigger problem compared to the situation we’re in right now,” Mejia said. “I think it would be better to focus on reaching an interest rate and capping it now, like student advocacy groups are pushing for.”
Junior Michael Lambert was also skeptical of the reform proposal.
“I believe Obama’s current plan is just a band-aid on the larger issue of student loan debt and our current education model,” Lambert said. “Under the current model it is either college or nothing. As a result we are seeing an increase in ‘paper’ colleges that just hand out degrees and overall devalue the degree which is given. There needs to be more options like the programs utilized in the UK, having trade school options.”
Offering his own proposal to the student loan issue, Lambert proposed “we need to focus our money on the output and invest in students that will be successful in the future and are able to make a difference than pay the same amount of money for people to have access to education, but do nothing with it.”
Director of Financial Aid Judith Logue also weighed in on the proposal.
“I’m all about keeping loans to a minimum and educating the students on financial aid,” Logue said.
She believed that there were aspects to the proposal that were important for students receiving financial aid.
“We would love to have more work-study and grant money here,” Logue said.
Logue also discussed how she believes that financial aid is tied to the preservation of democracy, so it is important that students are able to afford an education.
She said that USD has a very low default rate when for students paying off loans, but said it could increase if interest rates for loans went up.
If Congress does not act before July 1 of this year, loan rates will increase. Logue stressed the importance of students contacting their local Congressmen about financial aid reform to help ensure that students can continue affording a college education.