Peter Schiff - President Obama Announces Plan to Boost College Tuitions
President Obama today announced a plan that will ensure students are able to commit to higher levels of federally backed student loans. By limiting student obligations to repay, and by passing more of the repayment burden onto taxpayers, colleges and universities will be able to continue to raise tuitions at a rate that outpaces nearly every other cost center in the American economy. The move will come as a great relief to an education establishment increasingly concerned that students might no longer be able to afford skyrocketing tuition rates.
The AP reported today that state support for higher education has fallen 23% after accounting for inflation over the last ten years, even as tuitions have risen 5.6% faster than CPI. This gap has been bridged by a whopping 57% increase in federal student loans over the same time period due to the increased cost of tuition and number of student enrollment.
The Obama plan limits repayment obligations on those federal loans to just 10% of "discretionary income" which it defines as total income above 150% of the federal poverty level - currently translating to about $16,000 for an individual, or $33,500 for a family of four. The plan also limits the term of obligation to 20 years. These terms represent a substantial easing and acceleration of the terms in Obama's "Pay as You Earn Plan," which was just announced last year.