Blogs:

Halloween is not far away and kids in all households are eagerly awaiting their candy. Do you see how President Obama is courting young voters with the student debt consolidation option? Many feel this is a raw political giveaway even as he announced a plan that would greatly reduce student loan burden by allowing consolidation.

For example, those who have both a private loan backed by the government as well as a federal loan can now consolidate the two loans into a single government loan. Repayments will now be capped at a fixed level according to this plan.

Presently, fifteen percent of the income is the limit college graduates have to pay. After 25 years, all their debts will be forgiven. This plan stipulates that borrowers now can pay just ten percent of their income and their loans will be forgiven in 20 years.

This definitely makes it much easier for students to get into more debt and not pay it off. More than 1.5 million Americans will be affected by this plan says the Associated Press. Though students will naturally welcome this plan, it is troubling as it just reaffirms irresponsible borrowing culture that eventually led to the housing bubble.

What is the entire point of taking responsibility to pay back loans that are eventually forgiven after consolidation? Kids who have been paying back their loans on time till now find this not fair at all.
One of the major problems our higher education faces today is escalation in education prices and our President has made sure that the problem is directly under the risk of exacerbating. Colleges will no more have the incentive to reduce costs with easier availability of debt.

Problem here is not the already low lending rate. Issue is the principle. Cost of colleges is skyrocketing at uncontrollable pace forcing more students to take loans. Last decade saw a huge increase in college costs says CollegeBoard report.

According to this report, universities and four year public colleges raise tuition fee by 5.6 percent each year. This is more than the general inflation rate. For some, college expense is not really worthwhile any more. Students however are told that in order to land a good job, they must go to college.

Terms used in President Obama’s proposal makes it clear that student loan debt management will now be much easier. Discretionary income is a term used by him which is nothing but the balance money left over after saving, investing and spending on personal necessities like shelter, clothes and food. This money is spent by people mainly in non-essential goods and luxury items. Proposed plan will now cap this loan repayment at ten percent as compared to fifteen percent of this discretionary income.

According to statistics released by the White House, there are over six million loan borrowers who pay separate monthly payments for more than one government loans. Opportunity to simplify loan repayment through consolidation will be open to those with different federal loan types if the plan is approved.