CONWAY, SC (WMBF) – President Barack Obama announced Wednesday he will use an executive order to change some federal student loans. According to the President, about 8 million Americans with federal student loans will benefit from the change. About 36 million Americans have student loans, according to some estimates.
"It's mandatory basically, almost," commented Gilman Cani about financial aid for students. He has a loan to help him pay for classes at Horry Georgetown Tech.
"Even at a technical college, with tuition being high, you definitely need a student loan for your books because books are very expensive - and different payments," Cani explained.
Greg Thornburg, Vice President for Enrollment Services at Coastal Carolina University, said loans are becoming a necessity for more students as tuition and other costs rise.
Scholarships and grants are also financial aid options of course, but not for graduate students and others who do not qualify. One institute that tracks financial aid says two out of three students need loans, and these days, they end up owing nearly $24,000 on average.
President Obama's changes will allow people to consolidate loans if they have both government loans and private loans backed by the government. The plan could save each borrower about $1,000 in interest.
Also, people with a student loan who qualify for "Income-Based Repayment" will only have to pay 10 percent of their discretionary income toward the loan. Currently, the program requires a payment equal to 15 percent of discretionary income. After 20 years a student who does not default on his or her student loan can have the debt forgiven. Currently that forgiveness takes 25 years.
The expansion of the Income-Based Repayment plan was supposed to begin in 2014. Now it will expand in 2011, and the president estimates the change will save students who qualify a few hundred dollars a month.
Critics argue the changes will eventually cost the government and tax payers more money. The President said the changes will make more money available for students who carry too much of a burden in student loans after graduation.