Congressman John Garamendi, a former University of California Regent and California State University Trustee who represents the UC Davis community in Congress, praised President Obama’s decision to ease the crushing burden of college loan debt for five million student borrowers.
Under the President’s plan, being drafted by the Department of Education with a planned implementation by December 2015, an estimated five million borrowers with federal student loans will be able to cap their monthly payments at just 10 percent of their income.
“No one should be priced out of an education. Student loan debt is out of control in America. It’s preventing students with loans from taking the entrepreneurial risks that jumpstart economies, stopping students from taking public service jobs, and causing many students to think twice before enrolling in the college education that could forever improve life for them and their families,” Congressman Garamendi said.
Congressman Garamendi added, “In 2010, I was proud to vote for a substantial student loan reform that created a fairer system for new borrowers. It cut out the for-profit middlemen and capped yearly student loan payments at 10 percent of one’s income. It was an important step, but people who already had loans were not included in that reform. I’m glad the President is taking this step, helping five million more borrowers finally escape the crippling burden of student loan debt.”
On Monday, President Obama delivered remarks at the White House, announcing new executive actions to further lift the burden of crushing student loan debt, including a Presidential Memorandum that will allow an additional 5 million borrowers with federal student loans to cap their monthly payments at just 10 percent of their income.
Back in 2009, President Obama pledged, “We will provide the support necessary for you to complete college and meet a new goal: by 2020, America will once again have the highest proportion of college graduates in the world.”
“More students than ever before are relying on student loans to pay for their college education. 71 percent of students earning a bachelor’s degree graduate with debt, averaging $29,400. While most students are able to repay their loans, many feel burdened by debt, especially as they seek to start a family, buy a home, launch a business, or save for retirement,” the White House stated in a release.
He stated on Monday that, while his executive action will “make progress, but not enough,” Congress needs to take action as well. He brought up the bill written by Senator Elizabeth Warren that would allow students to refinance their student loans at today’s lower interest rates, noting that “it pays for itself by closing loopholes that allow some millionaires to pay a lower tax rate than middle-class families.”
“We are here today because we believe that in America, no hardworking young person should be priced out of a higher education,” President Obama stated. “This country has always made a commitment to put a good education within the reach of young people willing to work for it.”
The plan is modest, helping a typical student save about $2000 over the course of their loans.
“Because credit ratings are increasingly scrutinized in making employment offers, financing a home, or even opening a bank account, a damaged credit rating can further reduce borrowers’ ability to repay their loans. Today’s actions build on the Administration’s significant progress in creating flexible repayment options for borrowers and raising awareness about the steps borrowers can take to responsibly manage their debt,” a fact sheet stated.
The President directed “the Secretary of Education to ensure that student loans remain affordable for all who borrowed federal direct loans as students by allowing them cap their payments at 10 percent of their monthly incomes. The Department will begin the process to amend its regulations this fall with a goal of making the new plan available to borrowers by December 2015.”
Congressman Garamendi is also a cosponsor of H.R. 4582, the Bank on Students Emergency Refinancing Act, which would help 25 million borrowers nationwide refinance their existing federal and private student loans to lower interest rates, similar to those that are currently available to new student loan borrowers. In total, American families would save around $55 billion under the legislation, which they can then reinvest in their local economy.
Specifically, a recent analysis of the Bank on Students Emergency Refinancing Act by the Congressional Research Service shows that a middle-class undergraduate student borrower with an average loan debt would save more than $4,000 over the life of his or her loan. A typical graduate student would save more than $2,500, and parents who borrowed to pay for their child’s education would save more than $3,500. President Obama spoke favorably about this legislation in his remarks today.
The release from Garamendi stated, “The President’s plan is a furtherance of the college loan reform that Congress passed in 2010, legislation that was strongly supported by Congressman Garamendi. That reform ensured that all recipients of new federal college loans could cap their repayment at 10 percent of their income, with outstanding balances forgiven after 20 years of payment or 10 years of payment for those working in public service jobs like teaching and nursing.”
“However, the student loan reform did not extend to loans issued before the law,” the released stated. “Today’s action paves the way for older student loans to be grandfathered into a system more favorable toward students in debt.”
Over the past three decades, the average tuition at public four-year colleges has more than tripled, while family incomes have remained stagnant. 71 percent of those earning a bachelor’s degree graduate with debt, which averages $29,400.
Under the President’s proposal, a 2009 graduate earning about $39,000 a year as a fourth year teacher, with student loan debt of $26,500, would have his or her initial monthly payments reduced by $126 a month, an annual reduction in loan payments of more than $1,500.
—David M. Greenwald reporting
The headline should read:
“Garamendi Supports President’s Plan to Help Public Colleges charge higher tuition and fees and private colleges rip off even more kids”
Politicians are getting more and more support from people that work in higher education (in addition to the piles of cash from the owners of private “colleges”/”rip off factories” since the cash keeps flowing in with higher tuition paid with government guaranteed loans.
I’m just a little bummed that as a taxpayer I’ll be paying off the loan of a kid that gets a medieval history degree at UCD and goes to work at Starbucks, but I’m really bummed that I’ll also be helping the scammer private college owners like the Billionaire Sperling family (that owns the fake college University of Phoenix) make even more money charging tons of money for an education not even as good as a typical Junior College so they can build more mansions*)
*About 10 years ago I got to walk through the 17,000 square foot mansion that Peter Sperling was building on Broadway in San Francisco (before he decided that he liked another mansion in SF better and put the place on the market for $65 million)…
While I agree with almost everything you write here SOD, you sort of shoot yourself in the foot with your rant about the University of Phoenix and the “fake” college comment. While I absolutely agree that it is the government’s continued financial meddling in the business of high learning that has lead to hyper inflationary costs, it is also this tendency for the schools and people in general to denigrate or laude a school based only on tweedy prestige. While the value of a college education is attributed to the brand of the school and not specifically the quality and value of the education we will continue to encourage the building of more of the campus ego shrines that you complain about.
Education costs will fall as technology replaces the need for human educators and administrators. This new model college will likely derive from the private sector and not the state schools; so, although I agree that the Sperling family is getting rich from the easy and cheap government-backed student loan system, we should not get caught up in school elitism since this is the other thing that is driving up the costs.
Frankly wrote:
> While I agree with almost everything you write here SOD, you
> sort of shoot yourself in the foot with your rant about the
> University of Phoenix and the “fake” college comment.
> we should not get caught up in school elitism since this is
> the other thing that is driving up the costs.
I’m no elitist (and I’m one of the small number adults in Davis that didn’t go to grad school), but if you think that spending $25K to get a University of Phoenix (or other for profit) on-line MBA is a good value (for anyone but the Sperling family) you need to so some research. I bet half the people that get a resume with a UofP (not to be confused with UOP) “degree” on it laugh, while the other half cries (truly feeling sorry for the person who was ripped off)…
How would you compel colleges to charge less?
David wrote:
> How would you compel colleges to charge less?
Almost every business (even “non-profits”) tend to charge as much as they “can”.
If the government stopped the loan guarantees no one would loan a homeless guy $45K to go to the California Culinary Academy (that used to be a real cooking school before the criminal Career Education Corp. bought it about 15 years ago).
Real colleges like UC Davis would be forced to cut costs by focusing on actual education not multi-million dollar stadiums, flying sports teams around the country, gyms with climbing walls and “Resort-Style Recreation Pool, Heated Lap Pool , Hot Tub and Sand Volleyball Court”*
*Cut and pasted from the UC Davis West Village housing web page.
P.S. Just today in the Bee there was an article about a perfectly nice student housing building that is going to b torn down to spend $80 MILLION (much of it funneled to politically connected developers who will kick back a portion of their profit as perfectly legal campaign contributions).
P.P.S. Maybe we could also stop having taxpayers fund the tuition that pays for the “semi-pro” sports league in the US that pays HUNDREDS of people MILLIONS a year:
http://cdn.breitbart.com/mediaserver/Breitbart/Breitbart-Sports/2013/05/09/highest%20paid%20employees%20graphic.jpg
my view is forgive student loans. the government can eat the costs without it being much additional burden and it is likely to improve the economy.
DP wrote:
> my view is forgive student loans. the government can eat the
> costs without it being much additional burden and it is likely
> to improve the economy.
This will probably happen since we tend to punish good behavior and reward bad behavior in modern America.
We made the people who waited years to “legally” come to America wait longer when Regan gave Amnesty to the “illegal” aliens.
We reminded the people (like me) that worked hard and saved for a down payment how stupid they were when we bailed out the people that got (and the banks that made) “liar loans” with TARP.
Why not remind the people (like me) that went to an affordable college and paid his own way working crappy jobs and living in crappy apartments how stupid they were when we bail out the kids that borrowed more than they could afford to pay back while they partied for four (or five) years…
Agreed. So why don’t we just shrug and join the moocher class? We can go out and live large… buying bigger homes and nicer cars that we can afford. We can take off to Cancun twice a year except every other year when we vacation to Europe. Then when we are to the point where all of that debt catches up with us, along comes another government bailout and we do it all other again. If we start young we might get three or four cycles of this in before our early retirement… again helped by Uncle Sam because we failed to save enough.
The cost of college has inflated much greater than the rate of inflation. And there are not enough jobs for college graduates in any case.
Here is how we solve the problem. No college will be eligible for any federal aid… either direct of for any student that attends, unless that college holds the total average cost of undergrad and graduate degrees to the rate of inflation or less. Student aid includes government guaranteed student loans.
Additionally, offer incentives for students to attend schools that are more affordable and keep their costs lower.
Here is where college costs have primarily risen… the number of college administrative employees per student has exploded over the last 40 years. In addition, all college employees make much greater pay and benefits today than they did 40 years ago when compared to other professions.
And everyone gets more paid time off, gets to take sabbaticals and retire early.
Working in higher learning went from being a low-moderate -paid gig to one of the top-paid gigs considering all the benis and perks. This is nice for the employees of the schools, but very bad for the students that have to pay for it.
But all of this will crash and burn in thee next 5-10 years. Because the value is not there commensurate with the growing cost. New technology-enabled education models are already working and they will get better and better.
Ask yourself this… why does a person need to sit through expensive class after expensive class listening to the professor’s aid lecture on information that is readily available 24*7, 365 days per year on a handheld computer and communications device? The Internet is making a percentage of most college curricula obsolete and unnecessary. There is no reason that a quality undergrad degree cannot be accomplished in 2-3 years rather than the 4-5 it takes now.
“This will probably happen since we tend to punish good behavior and reward bad behavior in modern America.”
good behavior is not going to college when you can’t afford it and bad behavior is going to college in hopes you can make enough to pay off your debt?
Going in to debt is a bad idea unless you are going to make a positive return on your investment. Most (but not all) kids today don’t do a DCF analysis and just borrow $100K to have fun (including buying a lot of new Apple products) with no real idea how hard it is to pay off $100K (or what a bad decision they are making). If you don’t have any money for college (or parents that will pay) you can go to Community College (that is free if your family income up to $90K) and just over $100 a month if your family income is higher (but they won’t give you any money). By the time you are 20 with 60 units you can probably qualify go to a State College for free (or pay the tuition of under $500/month if you have a high paying job and don’t qualify for free tuition).
Bad behavior is using your student load to buy a car, buying a car when you can instead go to a school like Davis or UCSB or UCB (and ride a bike/ bus), buying iPhones / gadgets / iTunes, eating at Starbucks, buying marijunaa / ecstasy, and living like a quasi king without thinking of the debt that has to be repaid.
Bad behavior is staying in college for 8 years because you don’t want to get a job and because “free money” loans are available. Then getting out and not wanting to pay the money back.
Good behavior is buying something that you can afford. Two years in junior college and two more at a University while working can leave you will little to no debt if you live within your means.
Well said Sam!
Check out the new video we (as taxpayers) paid for to get more kids to go in to debt:
https://www.youtube.com/watch?v=oLX30ijbM2Q
How about we go after the one percenters who work at colleges and universities? Why should a chancellor make $1 Million a year, or $500,000 per year?
Garamendi and Obama don’t address the tripling of college costs… here at Davis we tear down affordable housing ($900 per month , 2 bedroom), to be replaced by “net zero” housing at $2,000 per month. Vanity projects?