Contact: Sandy Connolly, Director of Communications
Office of Higher Education
St. Paul, MN - Officials at the Minnesota Office of Higher Education (OHE) are applauding two initiatives announced today by President Obama aimed at lowering monthly student loan payments for borrowers struggling to repay their loans.
Susan Von Mosch, Interim Director at OHE, said she expects these initiatives to have a positive impact on student borrowers across Minnesota.
"Over the past few years, state funding for Minnesota colleges and universities has decreased dramatically, triggering tuition increases across the state well beyond the rate of inflation," said Von Mosch. "One of the results has been that Minnesota students borrow at higher rates than students nationally, and as a result, leave college with significant debt." According to Von Mosch, the average number of Minnesota students who graduated with debt in 2009 was 73 percent, and over 90 percent at some campuses. Difficulty finding a job during the current high level of unemployment makes repaying these loans even more difficult.
Under the administration's plan:
- Beginning January 1, 2012 through June 20, 2012, students with both Federal Family Education Loans (FFEL) and Direct Loans will be offered an incentive to consolidate their loans into the Direct Loan program. This would impact an estimated 120,000 Minnesota graduates, offering them both a lower interest rate and the convenience of paying one lender.
- More generous income-based repayment (IBR) terms will be fast-tracked to become effective in 2012 instead of 2014. Borrowers participating in the income-based repayment program, estimated to be about 10,000 in Minnesota, would be eligible to limit payments to 10% of monthly income instead of 15%, beginning in January 2012. In addition, borrowers who had not fully repaid their loans after 20 years would qualify for loan forgiveness instead of the current 25 years.
Also announced today, the U.S. Department of Education and the Consumer Financial Protection Bureau (CDPB) have teamed up to launch a new Know Before You Owe project aimed at creating a financial aid shopping sheet, which colleges and universities could use to help students better understand the type and amount of aid they qualify for and easily compare aid packages offered by different institutions.
The CFPB is also working to educate students and their families on their options for paying back their federal and private loans after graduation. This week, the consumer agency released the Student Debt Repayment Assistant, an online tool that provides borrowers, many of whom may be struggling with repayment, with information on income-based repayment, deferments, alternative payment programs, and much more.
"Whether you are a graduate with student debt, or a new student just entering postsecondary education, I encourage you to consider these new opportunities for assistance," said Von Mosch.