Rising Student Debt

Rising tuition costs are becoming old-hat for students in this frigid financial climate. With student loan debt continuing to soar nationwide, the timing was right for the Obama administration to step up and do something about it.

University of Colorado Denver students were the audience for President Obama's first public announcement of the administration's "Pay As You Earn" proposal Oct. 26. The proposal outlines ways to help students with significant loan debt manage their payments and avoid incurring further financial burden.

According to The Oregonian, outstanding national student loan debt is at more than $1 trillion, and has gone up 57 percent over the past 10 years.

In his speech in Denver, the president said that student loan debt has surpassed credit card debt for the first time in our nation's history. Obama's proposal would allow students who have taken out eligible federal loans after 2008 to consolidate them into one loan.

An estimated 1.6 million students stand to benefit from the administration's plan, which aims to cap loan payments at 10 percent of current discretionary income and forgive loans after 20 years of regular payments. These students now look at a 15 percent cap, with a required 25 years of regular payments before the feds will forgive the balance of a loan.

In order to qualify for the plan's Income-Based Repayment program, students need to meet a partial financial hardship requirement. According to the nonprofit organization Equal Justice Works, if a student owes more in eligible federal loans than they earn, he/she will typically qualify for IBR.

Mark Kantrowitz, the publisher of fastweb.com and finaid.org, told National Public Radio (NPR) that graduates this year will have an average debt of about $27,000, and the total average debt will be about $34,000. According to NPR, two-thirds of all college students will graduate with at least some debt.

Kantrowitz added that students should be realistic about how much they will make starting out after they earn their degree.

"I can see someone borrowing perhaps $10,000 a year if they're majoring in science, technology, engineering, mathematics, computer science or nursing, but I can't see borrowing that amount of money for a degree in art, or humanities, or sociology, because the jobs just don't pay as well for those fields of study," Kantrowitz said.

Clark student Wendy Visconty said that she has taken out three student loans so far and that she has no specific plan to pay them back.

"At this point, taking out loans for tuition is my only option," Visconty said.

Kantrowitz recommended that students save money for college, apply for scholarships and take out federal loans instead of private loans. He also advised students to pay interest while in school in order to keep debt manageable rather than impossible.