#OWS Obama student loan changes to be showcased tomorrow in Denver are not everything, but a step in the right direction. @ticas_org

Well, finally some information is up, at the Wall Street Journal.

Here is the basic plan – the private student loans would be able to be consolidated into a federal Direct Loan. Additionally, the payment percentage on Income Based Repayment, which is 15%, would be cut to 10% (not 7%, like I had hoped, to make a “shock and awe” statement.)

It isn’t clear if current graduates are included in the 10% rate, or just the (mostly) younger people still in college. The Journal said:

The president will also announce an acceleration of an income-based repayment program. Existing rules allow graduates to limit their loan payments to 15% of their income, with all debt forgiven after 25 years of payments. Congress has already passed a change to that program that would allow borrowers in 2014 to pay 10% of their income, with all loans forgiven after 20 years. On Wednesday, Mr. Obama will announce that he is speeding up this program so it will affect students beginning next year instead of in 2014.

[Update #1: OK, that Wall Street Journal article is a little ambiguous. In the student loan debt community, “private” loans are understood to be these recent, non-federally-backed student loans that were pitched as if they were what used to be called Stafford Loans. Because few borrowers read the (admittedly complicated) loan note, they didn’t realize that they were entering a transaction where the one kind of borrowing was different than the other kind.

If the WSJ article means “private” as those kind of loans, then mostly all the initiative is, is to bail out the banks that gave these kinds of loans. Yes, the student is being bailed out, too–thankfully–in the sense that they get to apply the government’s more favorable terms to the student loan debt. But it really is a boon to the private banks that lent this money. Those loans are not dischargeable in bankruptcy, just like the government student loan, but any number of recent graduates simply can’t afford to pay. So banks are left with whatever the garnishment rules are in the particular states.

If the WSJ article, however, is referring to “private” as non-Direct, federally-backed student loans, those have always been able to be consolidated with the Federal Direct Student Loan program. Always, meaning, since 1995, when the program was up and running. I did my own in 1995, so I know.

This was an early Clinton initiative that he never got credit for.]

[Update #2: You can tell how beneficial the program will be to student loan debtors if you watch the price of Sallie Mae stock:


It’s down about 10% today, as of this writing. Quite a drop.

Remember, most of the financial aid policy written in Congress since the mid 1990’s has been written at the behest of this one company, mainly–that many people still think is a “quasi-governmental agency” like Fannie and Freddie Mac. In fact, it has been private since about 1997, and well-connected in Congress.]

[Update #3: The USA Today has “Obama orders changes to student loan payments“.

The Philadelphia Inquirer has this.

It’s looking like the proposal will be good for all outstanding participants in IBR, and not just the current college graduates . . . ]

[Update #4: The White House Fact Sheet. This fact sheet implies that everyone, starting in 2012, is going to have the better terms (10% of disposable income and 20 year repayment terms) available.]


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