In an address at the University of Colorado Denver two weeks ago, President Barack Obama announced a plan to accelerate the Income Based Repayment (IBR) Consolidation Loan Program known as "Pay as You Earn" for student borrowers. The president aims to enact the legislation by sometime next year, two years before the measure's original 2014 implementation date.
The initiative Obama is attempting to accelerate includes a slate of reforms to the student loan process. Prominent measures include allowing college graduates to cap federal student loan repayments at 10 percent of discretionary spending and the forgiving of all federal student loans after 20 years, five years earlier than is currently allowed by the government.
Other aspects of the program include an initiative to consolidate federal student loans and reduce the interest rates imposed upon them, as well as the promotion of a "Know Before You Owe" model financial aid disclosure form that, when distributed by universities, will help students compare financial aid packages and institutional costs more easily.
Bernard Pekala, director of student financial strategies at Boston College, discussed the impact of the accelerated reform on BC students engaged in federal loan programs.
"Students with federal loan debt should consider the IBR (Income Based Repayment) program as one of their options," Pekala said.
In evaluating the reforms, Pekala alluded to the obstacles blocking the acceleration of the changes, including a bureaucratic process known as "Negotiated Rulemaking," according to the United States Department of Education. Such a process might alter the proposals and effectiveness of the reform, according to Pekala.
"The proposed changes could increase the attractiveness of the IBR program, but we will have better information after the Negotiated Rulemaking," he said.
In spite of his optimism, Pekala urged students to consider all their choices in addressing federal student loan debt, and emphasized caution before signing on to the new IBR program.
"Depending on the amount and types of federal loans, the IBR may not provide the (students') best option for a repayment schedule," he said.
Pekala urged BC students questioning aspects of the reform, especially the consolidation of federal student loans, to contact Student Services and its Student Loan team to help analyze the new measures relative to their personal loan packages. ♦
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