The “Occupy” protests that have spread to cities across America are an expression of the level of discontent the citizenry is feeling about the unequal distribution of wealth in the nation. There is also, however, an even greater gap in opportunity, broadened by the issue of mounting student loan debt. Many of the protesters are young people in their twenties to mid-thirties who are struggling under the crushing weight of paying off their college education. An executive order issued by the Obama administration in late October is a step toward improving conditions for that well-educated but struggling class of debtors.
Student Loan Debt Surpasses Credit Card Debt
Estimates place the level of student indebtedness in the U.S. at anywhere from $898 billion to $1 trillion, exceeding even the credit card debt that has been the bane of the American economy for the last decade. The instant a college graduate leaves the university, they are part of a growing class of debtors who fight to win entry level positions in their field in the face of high unemployment. When they are employed, they not only have to establish themselves professionally and build their personal lives, but find a way to manage debt that destroys the bulk of their discretionary income.
Current Debt Management Terms Misunderstood
In part, this is due to a lack of information. Few students know that current law allows them to limit those loan payments to 15 percent of their discretionary income, nor do they realize that the remaining debt can be forgiven after 25 years of payment. Current eligibility for the 15 percent cap can be determined at studentaid.ed.gov/ibr. However, the Occupy protesters and other critics say, rightly, that in the wake of the recession and with the ongoing economic instability, the cap is still too high and the forgiveness period too long.
Obama Uses Executive Order to Enable Loan Consolidation
The Obama administration agreed, and, in late October, used an executive order to bypass Congress and put measures in effect to help more than 1.6 million college graduates in lowering their monthly student loan payments beginning in January 2012. At that time, as many as 6 million current students and graduates will be eligible to consolidate their student loans and make their payments at a single interest rate. The measure should reduce the interest these loan holders are currently paying by as much as 0.5 percent, which represents hundreds of dollars in interest.
Further Student Loan Changes Proposed
In tandem with that action, the president is proposing, as an aspect of his jobs package, a program called “Pay As You Earn.” Beginning in 2014, it would allow Americans who have student loan debt to reduce their monthly payments to 10 percent of their existing discretionary income, with complete loan forgiveness after 20 years of payments. The plan, which is both a jobs bill and a stimulus program is called “We Can’t Wait,” addressing the growing feeling in the country that real economic change at the political level will not be possible until after the November 2012 presidential election.
Without question, however, the ongoing problem of student loan debt and the economic divide it is helping to forge in American society will be front and center in the coming campaign. The Occupy protests have served to highlight this problem, among others, in the American social and economic debate. The president’s executive action proves that not only is changed needed, but if our leaders want votes in November, they are going to have to back viable and immediate changes.