The president is attempting to remake the student loan industry. On Wednesday he announced a student loan forgiveness program that would make taxpayers absorb the financial risk.
The executive order will reduce monthly student-loan payments, consolidate loans into direct loans, and offer loan forgiveness after 20 years. It would also cap monthly repayment at 10 percent of discretionary income and offer students an incentive for consolidating Federal Family Education Loans (FFEL) and direct loans into the direct-loan program. Students will be given a 0.5 percent interest-rate reduction for switching to the direct-loan program.
“Our economy needs it right now,” Obama said when introducing the proposal. “And your future could use a boost right now.”
This proposed program would go into effect in 2012, two years sooner than the original plan.
While many students are excited about the proposal, some believe that others would abuse the program, refusing to pay off loans simply because they will at some point, be forgiven.
Read more about the student loan forgiveness program.