President Obama’s latest push to help student-loan borrowers includes an initiative to better inform them before they take on debt.
Speaking at the University of Colorado in Denver Wednesday, Obama outlined his executive order to accelerate the income-based loan-repayment plan Congress approved last year so students would be eligible in 2012. The plan caps loan repayments at 10 percent of discretionary income and was slated to go into effect in 2014. (See the Politics K-12 blog for details.)
Obama also announced a new fact sheet, “Know Before You Owe,” being developed by the Consumer Financial Protection Bureau. The financial-aid shopping guide would include information on how much college will cost each year, loan and work-study options, and likely monthly payments after graduation. The bureau is seeking feedback on the concept to see what information the public thinks is most critical.
When prospective students apply for financial aid, schools usually send letters to them that detail the financial aid available. This initiative by the newly formed CFPB attempts to make it easier for families to compare information about how much debt they will be taking on to go to college.
The president said that the Know Before You Owe sheet will be designed so students have the information they need to make decisions about how to pay for college. “I promise you, I wish Michelle and I had had that when we were in your shoes,” said Obama, who spoke about their $120,000 in student debt that they paid off over 10 years.
The information initiative and repayment change will help more young people figure out how to afford college and put more money in their pockets once they graduate, said Obama. “And because you’ll have some certainty, knowing that it’s only a certain percentage of your income that is going to pay off your student loans, that means you will be more confident and comfortable to buy a house or save for retirement,” he said. “And that will give our economy a boost at a time when it desperately needs it. So this is not just important to our country right now, it’s important to our country’s future.”
A version of this news article first appeared in the College Bound blog.