When Bruce Yan HM ’15 graduates from college, he and his parents will have to pay back close to $50,000 in student loans.
“I have more than $6,000 in student debt from loans and my parents took on about $40,000 to put me through college,” Yan said. “Generally, there’s a lot of pressure among my peers to get jobs with high-paying salaries so we can pay off debt and pay back our parents.”
Students like Yan were among the main topics of President Obama’s State of the Union Speech Jan. 26. Obama said that making a college education more affordable for all Americans is one of his top goals for the next four years.
Currently, Americans owe $865 billion in student debt, a total that is higher than the nation’s $693 billion credit card debt. Obama said the student debt total is on track to rise if Congress does not extend the American Opportunity Tax Credit. The President’s reelection website says that tax credits have already helped over nine million families save up to $10,000 each over four years.
Interest rates on Stafford loans, which the government will pay back if the student cannot, will double from 3.4 percent to 6.8 percent in July if the College Cost Reduction and Access is not extended this year, Obama said. Proponents of the extension deem it crucial as the economy is still recovering and the unemployment rate hovers near ten percent.
Two of the 5Cs, Pitzer College and Scripps College, do not have completely need-blind admissions policies for domestic students. Obama’s plan could benefit applicants who cannot afford the full tuition at these schools.
“Personally, I have more than $3,000 a year in student loans. Scripps was generous in their aid package, but I don’t think my parents would agree to finance a private education without loans at low interest,” Phuongan Bui SC’15 said.
Obama’s proposed plan could help Claremont students like Yan and Bui even after graduation by lowering the maximum payment of 15 percent of discretionary income to ten percent. Under the plan student loans would be annulled after 20 years for responsible borrowers.
After the initial September 2007 lowering of student loan interest rates under the College Cost Reduction and Access Act, Harvey Mudd College Director of Financial Aid Gilma Lopez observed that many graduates were consolidating their loans because of the low interest rates. There was also less borrowing by parents as students took on more loans on their own.
The change in federal policy does not directly affect admissions or financial aid operations for Claremont McKenna, Harvey Mudd and Pomona Colleges because financial aid decisions are made completely separate from admissions decisions. However, changes in federal and state policy are noted by financial aid officials because they may affect budget and appropriation of the endowment for scholarships.
“I do communicate with my boss as far as potential impacts on the budget,” Lopez said. “For example, right now we are looking at Governor Brown’s proposal that Calgrants for students attending private schools like the 5Cs be reduced by about 34 percent.”
She encouraged students to demand government action.
“Students need to be more active in letting their concerns be known,” she said. “Obama is proposing that the number of college graduates grow and they need to make it a little more practical.”