Obama announces student loan debt proposal
The proposal may have minimal impact on Penn, which has a no loan policy
November 1, 2011, 11:03 pm·
Occupy Philadelphia may be attacking the 1 percent, but President Barack Obama is helping the 23 percent at the University of Pennsylvania.
On Tuesday, Oct. 25, Obama announced a “Pay as You Earn” proposal to help struggling college graduates with their student loan debt.
Twenty-three percent of full-time undergraduates, or 2,347 students, currently rely on federal direct loans, according to Sharon Pepe, the senior director of credit service at Penn.
Dean of Admissions Eric Furda, however, believes that Obama’s proposal will only translate to Penn “minimally because of Penn’s financial aid policy [which is] a no loan policy.”
Penn’s no-loan policy assumes that a student will cover certain expenses, such as health care, and cover a portion of expenses with a work-study or a summer job.
Obama’s proposal is directly targeted towards loans such as the Direct Loan. His proposal covers education, repayment and consolidation. These include the “Pay as You Earn” and the “Know Before You Owe” proposals.
At Penn, in order to guide students with their loans, Direct Loans are generally initiated through the Penn Loan System, which works through the Penn Portal.
One-on-one meetings with an assistant director in the Counseling Center can also be used to discuss a student’s financial situation, and the assistant director can initiate the loan request on behalf of the student, Pepe wrote in an email.
Penn also limits the amount that a student may borrow, Pepe added. This number is based on the difference of their costs for education aside from outside aid, or on the statutes that regulate a maximum based on year in college — whichever of these two is smaller.
Making college more affordable is important because tuition has been increasing, according to Laura Perna, a professor at the Graduate School of Education.
According to The National Center for Education Statistics, in the past decade the cost of a college education — including tuition, room and board — increased by 37 percent at public institutions and 25 percent at private institutions after adjusting for inflation.
Since 1990, Penn’s tuition has increased by over $20,000 — nearly twice the rate of inflation. Tuition for the 2011-12 academic year currently stands at $37,620.
These increases in tuition mainly affect minority and low-income students, Perna said. These groups are less likely to attend college as tuition increases and financial aid becomes less available.
“This is a tough time for a lot of Americans — especially young people,” Obama wrote in an op-ed on Tuesday for college newspapers. “And now, as you’re getting ready to head out into the world, many of you are watching your friends and classmates struggle to find work. You’re wondering what’s in store for your future, and I know that can be scary.”
Education regarding tuition is also a problem. “Many students and parents have very little information on how much college actually costs,” Perna said, adding that applicants who are the first in their family to attend college are especially at a disadvantage.
The proposal, according to Obama, represents crucial steps being taken “to make college more affordable and to make it even easier for students like you to get out of debt faster.”
“Our society has moved to a model of financing education that is much more reliant on students and parents to pay,” Perna said. “But for a substantial share of students, there’s successful borrowing… [while some have] real challenges paying back.”
Although he admitted that students are facing a difficult economic environment upon graduation, Obama is hopeful.
“The fact that you’re investing in your education right now tells me that you believe in the future of America,” he wrote.