The director of Purdue’s financial aid department believes President Barack Obama’s recent executive order to aid with student loans will be most helpful in the area of retainment.
Wednesday, Obama announced an executive order to accelerate a student loan program to take place in 2012. Originally, it would have taken place in 2014. This program could potentially save students thousands of dollars.
The program will do three things.
It will allow students to combine all federal loan payments onto one monthly bill rather than a bill for each federal loan.
It will also decrease the maximum required payment on student loans from 15 percent of discretionary income annually to 10 percent. Also, the remaining debt from student loans will be forgiven after 20 years instead 25 years, as well.
Ted Malone, executive director of financial aid, said this will give current students who could be struggling financially the option of knowing where they stand, possibly helping with the decision of whether to continue at a particular college or not.
“It certainly makes the option that you know what your payments are going to be when you get out,” Malone said.
Malone said he doesn’t foresee a lot of students using this new federal loan program to pay the minimum required payments until 20 years have passed.
“The payment is obviously smaller, which makes it easier to make the payment on time than if it’s larger,” Malone said. “If it’s a temporary thing, the economy takes a downturn and takes longer to right the position; it’s a real benefit with a short-term effect.”
There is a negative, however, Malone said. The accruing interest from not paying the loans quickly would not really decrease the total amount needed to be paid and keep students paying loans. The added interest could keep students in debt for the full 20 years.
“The downside of the payment is it extends how much longer making payments could ultimately cost,” Malone said.
Mike Cross, secretary for Purdue College Republicans, said he believes the announcement was a move to gain more young voters.
“He was very popular in 2008 and he’s trying to get the student vote again,” Cross said.
Cross said he would like to know how the potentially increased amount of forgiven student debt is going to affect the government.
“It sounds like a great idea to me as being a student and not having pay for my debt, but who is going to pay for it?” Cross asked. “We won’t pay for it as students, but as tax payers. And now, not only our own debts but other students’ as well.
“I may not be an economist, but I have common sense. And paying your individual debt makes sense.”
Bert Rockman, head of the political science department, also said Obama’s acceleration of the student loan program was very well-timed.
“Putting aside the virtues of the proposal, it has to be seen as a part of the election coalition for 2012,” Rockman said.
Rockman said Obama could be attempting to get the Republicans to argue against the proposal. Rockman said because the Republicans are the majority in Congress, it has been much harder for Obama to get things done.
“The opposing party’s ideology is pretty much to oppose the other party’s – if Obama proposes it, we oppose it,” Rockman said. “He’d like to have them voting against the time for pay back of student loans.”