Latest “School Days” Video Features “Pay As You Go” Proposal on Student Loan Debt

President Obama’s “Pay as You Go” proposal to make college more affordable is the top story in the October 2011 edition of School Days, the U.S. Department of Education’s monthly video journal. Other topics featured include Secretary Arne Duncan’s visit to Puerto Rico, higher education summits with Indonesia and India, and West Coast town meetings with parents and teachers.

Watch the October 2011 School Days here:


Click here for an alternate version of the video with an accessible player.

7 Comments

  1. Well, all I want to know is how in the world do you pay off the loans when they continue to add interest…monthly? I know my past decisions got me where I am, but I just don’t see the end!!!!! Help!!!!

  2. I work in Student Finance and take a taxpayer return on investment point of view. Unfortunately this proposal will further exacerbate the over borrowing problem and discourages on time graduation. The decreased repayment requirement under the IBR plan in conjunction with the HEA “Cost of Attendance” definition create moral hazards by incentivizing over borrowing and prolonged enrollment. Through minimal attendance (i.e. one class at a time), students live on their refunds for years on end, endlessly defer their loans, borrow 2-3 times as much as their full time counterparts and then escape fully repaying their loans under IBR. This is especially acute at the Graduate level, where the loan limits are much larger, admission requirements are often minimal and the school can define “Full Time” as one class at a time (With Grad Plus Loans and the much larger Stafford amounts in the mix COA is the only “limiting” factor if you can call it that). “Cost of Attendance”, as currently defined can be as much as three times direct cost, e.g. $13,000 for $4500 in direct cost, even if the student is attending one class a week after working hours or enrolled entirely online. There are so many convenient MBA programs available, many of which require very little in the way of admission requirements, that the stage is ripe for abuse.

    This problem could largely be curtailed by eliminating “indirect costs” from “Cost of Attendance” for fully online and less than full time students in the HEA title IV regulations. Students who are half time or online are currently allowed “Room and board”, “Personal” and “Transportation” expenses. These expenses, while real, in actuality have nothing to do with attendance that is 100% online, once a week after work or on the weekend, so why is it deemed necessary to finance these? This recognizes the fact that a half time or online student can work full time for living expenses. If they do not work, they can go full time. Room and board and transportation may make sense for a traditional student going full time while living on campus, but not when attendance is largely after working hours and/or online. The integrity and solvency of the student loan programs are at risk if ED allows people to borrow more than they can fully repay, but the current regulations make over borrowing (and tuition inflation for that matter) all the more intense. If this were changed, it would lower indebtness, increase students’ ability to fully repay their loans and encourage students to graduate on time.

    As a financial aid professional, I try to encourage conservative use of loans, but from the student’s point of view, with IBR and COA in place, why stop borrowing? Once they borrow above their ability to repay, why try to finish sooner when they can live on their refunds at taxpayer’s expense? The person who borrows within their means and finds work will fully repay their loans, while the person who drags on their enrollment, lives off of their aid pursuing second and third degrees (which often do not increase employability) gets a free ride from Uncle Sam when their loans are written off.

    I will go out on a limb and postulate that if IBR and COA remain in place as they currently stand, about one half of the total dollars outstanding on all Federal student loans will never be paid, leading to a taxpayer write-off on the order of a half a Trillion dollars.

  3. Mr. Secretary, are you aware that a change in DOE policy regarding the reporting of students loans to credit reporting agencies is dramatically lowering the credit scores of Direct Loan participants and making it much more expensive for borrowers in good standing on their Direct Loans to obtain credit for any purpose? Last week, my credit scores took a dramatic tumble downward as the result of this new reporting policy. After hours speaking with Direct Loan customer service representatives via phone (I spoke with representatives in the Direct Loan Servicing Center in upstate NY and my loan is serviced from the Greenville, TX office), my understanding of this situation is as follows: whereas the DOE formerly reported all Direct Loans using SSN identifiers, the Department has recently switched to a new system that avoids the reporting of SSN’s and, instead, reports Direct Loan data using Direct Loan borrower account numbers. Since many (perhaps most) borrowers have consolidated both subsidized and unsubsidized loans into one large Direct Loan, this new reporting regime is now reporting two student loan accounts (1 under the unsubsidized account #, and 1 under the subsidized account #) with the DOE instead of one (the system for many years has reported a single loan for borrowers under a single SSN#). I understand that the DOE prefers to maintain separate data trails for the subsidized and unsubsidized portions of the student loan debt consolidated into the single Ford Direct Loan in case of deferments, inability to pay, and so on, but this does not require the Department to report this information as if there were 2 distinct student loans rather than 1. Although the total amount owed under the combined loans is the same, the fact that the DOE is now reporting that students like myself have 2 large students loans rather than 1 is causing the credit scoring algorithms used by the credit reporting agencies to dramatically lower our credit scores even though the total amount owed is unchanged. I am certain you will understand that it is difficult enough to stay in good standing on our loans without the need to now pay much higher rates for car loans, credit cards, and all other forms of credit. Moreover, I believe this new reporting regime is inappropriate since all of my debt and the debt of tens of thousands of former students like myself was consolidated on a single date into a single large Ford Direct Loan (rather than into 2 separate loans). Can you please take action to prevent tens of thousands of Americans like myself from this adverse result of the new reporting system? I greatly appreciate any attention you or your staff can devote to this important and urgent issue.

  4. Thanks to Obama to make college more affordable. You will get more people that have a diploma. This will make the economy a lot better because more people can work. So there will be more money to spend. It will be a win win situation if college will be more affordable.

    • More people with diplomas will make the economy much better? That’s one of the problem with Obama’s college for everyone thinking.

      Take a walk around any city and tell what percentage of jobs require college.

      All you get is a bunch of college debt slaves working at jobs “not in their field”.

      • It’s not that they don’t need college, but that they need more realistic views of options upon exiting college. I work as an advisor for a college. Many students come in wanting to study psychology, because they’ve always like looking at people. They have no intention of going to graduate school.

        So, they end up in the social work field, because that’s about the only option for a bachelor’s in psychology. It’s not “in their field”, but it needs to be done. We, as a country, need to get together and come to consensus on a new Politically correct.

        Telling a student that an Art History degree can’t get them a lot of traditional jobs isn’t hurting their future. They just need to be prepared to not make $80,000 out of the gates, or, not work directly in their field for a few years.

        • I agree with the start of your response Rob, but students “gaining a more realistic view of their options after college” doesn’t change the overall high cost of college.

          If the average student realizes that the employment opportunities they will encounter after completing their degree (with a realistic recognition of real life decision making, of time and financial obligations, and of real life expenses) how will they justify willingly entering into a debt that will follow them into their adult lives?

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