1 How big a problem is student loan debt? Total outstanding student debt has passed $1 trillion, more than the nation's credit card debt, and average indebtedness for students is rising. The College Board said Wednesday that the average in-state tuition and fees at four-year public colleges rose an additional $631 this fall, or about 8 percent, compared with a year ago. The cost of a full credit load has passed $8,000 -- an all-time high. The board said about 56 percent of bachelor's degree recipients at public schools graduated with debt averaging about $22,000. From private nonprofit universities, 65 percent graduated with debt averaging about $28,000.
Experts say those average amounts usually are still manageable, at least for those who finish a degree. But they are concerned about the rate of increase, the growing numbers with substantially more debt and the increase in those apparently in over their heads repaying them. The Education Department said in September that the national student loan default rate for the 2009 budget year had risen to 8.8 percent.
2 How much will Obama's plan save borrowers? Some borrowers will save several hundred dollars a month in payments. Those interested in learning more about the programs, call 1-800-4FEDAID or go to www.studentaid.ed.gov.
3 Does the plan affect private loan borrowers? Before the law change, borrowers wanting a student loan backed by the government could get loans from the government or from the Federal Family Education Loan Program. Those from the Federal Family Education Loan Program were issued by private lenders, but basically backed by the government. The law eliminated the private lenders' role as middlemen and made all such loans direct loans. The law was passed with the overhaul of the health care system with the anticipation that it would save about $60 billion over a decade. Students typically get private loans -- typically from banks with higher interest rates -- after they have received all that they can from the government. Obama's plan won't help students stuck in those. The amount of private lending has fallen sharply in recent years as lenders have cut back and demanded higher credit scores. However, for extremely expensive colleges, students may hit the maximum federal borrowing limits and have no choice but to look for private loans.
4 Can you qualify if you're already in default? No. The accelerated component of the income-based repayment plan only applies to borrowers who take out a loan in 2012 or later and who also took out a loan sometime between 2008 and 2012, according to the Education Department. To be eligible for the consolidated loan component, a borrower must have both a direct loan from the government and a loan from the Federal Family Education Loan Program.
5 How can the plan be free to taxpayers? A White House official says it doesn't cost taxpayers anything because when the loans are consolidated, the government no longer has to pay a subsidy to private lenders on the Federal Family Education Loan Program loans.
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