Has President Obama Solved the Student Loan Crisis?

by Phil Stott | June 09, 2014

If you're one of the millions of current or soon-to-be college graduates who are struggling under the burden of student debt, there's some good news: relief is on the way.

The reason: an executive order from President Obama that extends the ability to cap student loan repayments at 10 percent of your monthly income, with forgiveness of any remaining balance after 20 years (or 10 years, if you go to work in the public sector).

Those most likely to feel the benefits: anyone whose loans pre- or post-date the qualification window for the program that currently exists, i.e. those with loans made prior to October 2007, or since October 2011.

The bad part? Even if you qualify for the new program, you won't be able to take advantage of it until December 2015.

All told, though, this seems like a good move all around: people who can't afford their current repayment schedules will gain some measure of relief. Those who are paying more than 10 percent of their salary will soon be free to do something else with the money (like move out of mom and dad's basement), and landlords, restaurateurs, clothing manufacturers and the like may well be seeing an uptick in business from a slightly less cash-strapped generation.

Additionally, according to a Reuters report on the initiative, a White House spokesman pointed out that a system of more manageable payments means that graduates are less likely to default on their loans. The importance of that: loan defaults damage credit ratings--something that can then hinder those same graduates from acquiring a job. 

There being no such thing as a free lunch, however, it's important to point out that someone will be footing the bill for the program. Or, rather, everyone will: any debts to be retired will essentially be absorbed into the federal government's budget—something that is sure to provide no small amount of commentary in the days and weeks ahead.

What’s your take on the executive order and the state of the student loans system? Let us know in the comments section or on Twitter.

Read More:

Reuters: Obama to issue order easing student loan debt pressures

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