As college students graduate, they rejoice their step ahead towards their career. It brings about college graduation parties and coming back home while finalizing resumes and applying for jobs. However, we often forget that during this time, these graduates are also under a huge amount of student debt, with about six months to start paying off the loan. If you are a recent college graduate seeking employment to pay your loans, a parent helping your child minimize the burden of student debts, or a freshman who has just accepted a financial package to fund college studies, you are very well aware of the shadow these loans have cast over the lives of Americans.
There was a time when credit cards, mortgages, and other related loans had become America’s major concern. However, the latest figures from the Federal Reserve Bank of New York testify the gravity of the mounting student debts. Outstanding student debts climbed to $1 trillion in 2013. Furthermore, the delinquency of student loans for 90 days or more are approximately 11.8 percent. These figures are growing everyday and America needs an emergency plan to handle the student debt crisis.
This scenario proposes two major questions:
What is the government doing to handle this major crisis? And most importantly, regarding the financial and emotional havoc these loans have had on the lives of students and their families, is it worth it in the end, after all?
President Obama seems to have taken the concern of student debt quite seriously. He has recently announced a plan to help relieve college graduates from the burden of these educational loans.
President Obama has signed an executive order; step towards handling the student debt crisis. This gesture by the President has expanded the eligibility for Pay As You Earn. This hopes to alleviate the growing concern for student loan and the dark side of its immediate consequences. If you are an eligible borrower, this step by the President has capped the monthly payments of your student loans to no more than 10 percent of your monthly income.
Moreover, President Obama has responded to the demands of the college graduates by even further mitigating the situation if you are working nonprofit or in the public sector. In such a situation, if you are not able to pay your outstanding debts in 10 years, the remaining debt will be forgiven. For the people working in the private sector, the period is 20 years.
This policy makes it look like President Obama is ready to forgive the college graduates as if they have committed a youthful transgression. Nevertheless, it is surely an appreciable move.
In 2013, the congress enacted the law signed by President Obama to handle the student loan crisis. This was known as Bipartisan Student loan Certainty Act of 2013. It was enacted by the congress to target the overwhelming concern of student debts by lowering interest rates on graduate and undergraduate loans.
Although, Congress argued on some concerns they had with the act, they eventually accepted it and passed the bill in July 2013.
The Americans are not quite happy with the recent development by the government to counteract the problem of student debts. Many Americans have argued that the reforms for student debt target the interest rate and paying back of the loan when it has already reached $ 1 trillion dollars. According to them, it should be more focused towards increasing the employment opportunities for graduates and their wages. Furthermore, the law enacted by Congress has been criticized on the grounds that decreasing interest rates do not help the individuals who have already paid high interest on student loans and have already defaulted.
President Obama’s heavy investments in the defense sector have also been criticized as not a necessary objective of the Americans. They have shown their concern of spending the same enormous amount of money on eliminating student debt crisis, which has now had deleterious effects on the economy.
In a nutshell, the only major fault on the part of the Government to handle student debt crisis is that they have acted only when the situation has become out of control. These reforms are in no way going to miraculously solve the issue in one day but at least have shown the concern of the government in this regard.
As President Obama himself said:
“It’s all a good start—but it isn’t enough.”