The "Pay As You Earn" option previously only applied to those who started borrowing after
Obama also will instruct the government to renegotiate contracts with federal student loan servicers to encourage them to make it easier for borrowers to avoid defaulting on their loans.
Under the loan reduction program, any balance that remains unpaid after 20 years of making payments is forgiven, or 10 years for those in public service jobs.
The administration's goal is to make the expansion available by
"It's giving graduates the opportunity to pursue the dreams that inspired them to go to school in the first place, and that's good for everybody," Obama said. "It's going to make progress, but not enough. We need more."
To that end, Obama used the
The news wasn't met with glowing praise in all quarters.
"It's helpful in that it's reducing monthly payments by a third," said
Kantrowitz added that the "Pay As You Earn" option will still not be available for private student loans or parent loans.
The expansion is good and bad news for
Pratt, 36, took out about
"I don't see a great change if it's just the federal loans," said Pratt, who works as a studio assistant for an artist in
The real issue, Kantrowitz contends, is "the burden of paying for college has shifted from the government to the families, but family incomes have been flat. When faced with increases, families realistically have two choices: borrow more or shift enrollment from a higher-cost school to a lower-cost school."
"The overall takeaway is if you're struggling to repay your loans, you may have a slightly better chance for financial relief," Kantrowitz added. "The real problem is the amount of debt. People are graduating with too much debt. Federal and state government have not been anteing up. Grants haven't been keeping pace."
Student loans are the only form of consumer debt that has grown since 2008, according to the Federal Reserve Bank of
Experts say high levels of student debt impede the formation of new households -- which impacts home sales -- and the ability of young people to accumulate wealth.
"The real challenge is the overall debt is still out there and causes problems like not being able to qualify for home loans, car loans, having this huge cloud over their head continually," said Burbank financial planner
"They're not doing anything substantive in my opinion. It's kind of frustrating because I see clients working on these issues, and the real problem here is that whenever they come back and they propose solutions like this -- it's like when you got a car dealership and all they want to talk about is monthly payment, not how much the car is or how much you're paying over the life of a loan."
And it's not just recent grads who are struggling, said Lawson. "I have clients in their 40s and 50s with
Contact the writer: firstname.lastname@example.org
(c)2014 The Orange County Register (Santa Ana, Calif.)
Visit The Orange County Register (Santa Ana, Calif.) at www.ocregister.com
Distributed by MCT Information Services