Today Show: The High Cost of College
It is not being reported that 70% of students will leave college with high amounts of student loan debt. The Obama administration started a program to forgive much of those costs for graduates who seek jobs in public service, but with so many students enrolling, it poses the question of if it is actually driving up the cost of tuition.
Sharon Epperson, a CNBC personal finance correspondent, was on the Today Show to share what she knows about the issue that could effect such a large number of people.
College enrollment is up 40% in the last six months and in order to help students pay off their debts, income-determined payment plans that allow you to pay somewhere between 10-15% of your discretionary income were created.
Today: How Does Loan Forgiveness Work?
The high cost of college has resulted in programs put into place to help students manage their student loan debt. What are your options?
The way loan forgiveness works is that payment is based on income. The program encourages public service and allows you to pay 10-15% a year of only your discretionary income. After anywhere from 10-25 years, your debt is forgiven.
Epperson explains that if you keep on-time payments, you can do this for 20 to 25 years depending on when you took out the loan and then the loan can be forgiven. If you go into a job in the public sector, the loan can be forgiven in 10 years.
Today Show: Can I Get Student Loan Forgiveness?
The program can help a lot of people who may not be thinking about public interest jobs because they are afraid of the debt they are going to accumulate. It is also great for people “who may be on the line of defaulting their loans.” Helping those people is what the administration is trying to work toward.
Put more simply, the program would students by making payments more manageable and it would help the government by reducing student loan defaults, according to Today Show. It would also help the community by encouraging more public sector jobs.
Today: Rising College Tuition & Income-Based Repayment
There is now a fear that these programs are so popular that they’re going to cost the government too much money. It could cost somewhere around $14 billion a year just for two types of income driven programs: the income based repayment plan and the new Obama plan “pay as you earn.” It is true, however, that tuition is going up. Tuition is up more than 6% in the last 10 years.
Epperson reported that the chief architect of the income based repayment plan, who is advocating for it, says there are some consequences that were unintended. One of the consequences is that the pressure on colleges to keep the cost of higher education affordable has now somewhat gone away. There is now talk about making these programs mandatory.
Today Show: Student Loan Repayment
For more information, go to studentloans.gov to find about the repayment plan and see if you qualify. Sally Mae also has tools on its website to help you figure out the best repayment plan for you.
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