We are disappointed by President Obama’s “Help Americans Manage Student Loan Debt” proposal.  The plan, derived from a proposal earlier this year that was part of the President’s Fiscal Year 2012 budget and subsequently rejected on a bipartisan level by the House and Senate, merely moves loans from the private sector to the federal government and does little to address student debt.  While students can be eligible for up to 0.5 percent interest rate reduction after consolidation, this is only available for a short time: borrowers must consolidate between January 2012 and June 30, 2012 and cannot have defaulted on any loans. In addition, the income-based repayment advantage of a 10% of discretionary earnings payment cap is available to a limited group of borrowers: students currently enrolled in school that took out their first loan in or after 2008 and will take out another loan in 2012. By focusing only on a limited group of students, the proposal does little for borrowers struggling to repay student loans in today’s distressed job market.

 

Moreover, the loan-shifting plan needlessly usurps student loans from nonprofit and state agency student lenders; which will cause many borrowers to lose valuable borrower benefits offered by these organizations. Shifting loans from the private sector to the federal government will also cause further uncertainty in the capital markets; fostering an unstable economy and job market.

 

President Obama’s proposal, available to a limited group of students for a limited amount of time, does not address the real student debt problem: rising tuition and the lack of well-paying jobs.