For the last few days, President Obama has been hinting about a new education plan that, he claims, will improve the quality -- and affordability -- of college. On Thursday, in a speech at the University of Buffalo, he finally unveiled the proposal. In a nutshell, it's going to be a rating system that will rank colleges based on their cost-effectiveness. Among other things, it will factor in graduation rates, tuition costs, graduate debt, graduate earnings, and the percentage of lower-income students among the student body.
For the president, one of the most attractive aspects of the new plan is likely to be the fact that it doesn't require congressional approval. Speaking to reporters before the event, Education Secretary Arne Duncan noted that, while the administration will likely seek input from Congress, it plans to create the ratings system on its own. The first version of the system would likely roll out in 2015.
This is fine in the short run, but the White House will need congressional support if it hopes to progress to the next step, in which it plans to link student aid to university performance. While it is unclear how, exactly, this would work out, the general outline is that the government would offer larger loans and better rates to students attending higher-ranked schools. Assuming that the president can get Congress to agree, this portion of the plan would go into effect in 2018.
While colleges have yet to weigh in on the new proposal, it seems likely to ruffle some feathers: for years, colleges and universities have worked on finding ways to manipulate U.S. News' yearly college rankings, currently one of the top tools that parents and students have for choosing a school. Given the huge economic impact that the federal college list would have, it seems likely that the development of the ranking system will be heavily politicized, with colleges fighting to have their strengths more heavily weighted than their weaknesses.
The president's political opponents have already started to weigh in. Rep. John Kline (R-Minn.), chairman of the House Committee on Education and the Workforce, cautioned that Obama's plan "could curtail the very innovation we hope to encourage -– and even lead to federal price controls."
It remains to be seen if the president's plan will be able to balance its rating of educational outcomes with the potential costs of government intrusion into the educational marketplace. Even so, for students and parents looking for a better return on their educational investment, Thursday's announcement is definitely a ray of light.
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One solution is to take advantage of some of the loan forgiveness opportunities that are already out there. The military, the federal government, and state governments offer dozens of programs that will wipe away at least part of your debt, in return for a few years of service. Most are tied to specific, in-demand professions in areas such as health care, law enforcement, and education. but others -- like the military, the Peace Corps, and AmeriCorps -- are open to people from a variety of majors and disciplines.
American Student Assistance, a nonprofit group that helps people manage their student loan debt, has produced a free list of occupation-based loan forgiveness programs. It's worth a peek -- even if you don't plan to become a firefighter, policeman, speech therapist or social worker.
Several programs will allow you to structure your repayment of federal student loan debt based on your income. For example, if your loan payments are more than 15 percent of your discretionary income, you may qualify for income-based repayment, under which your monthly payment calculated based primarily on what you earn, and after 25 years of payments, any remaining money owed gets forgiven. Other programs, including income-contingent repayment and pay-as-you-earn forgiveness, are pegged to different income levels.
Nobody wants to die, go through bankruptcy, or suffer a total and permanent disability. However, if you experiences one of these life events, your federal student loans will be discharged. The banks behind private loans, however, may still go after your cosigners in an attempt to recoup their losses.
Assuming you're not a too-big-to-fail bank, the idea of going deeper into debt in order to make more money may sound counterintuitive. However, in many fields, a graduate degree can vastly increase earning power. "What's It Worth," a publication of Georgetown University's Center on Education and the Workforce, ranks graduate programs by their return on investment. Not surprisingly, degrees in medicine, the social sciences and hard sciences top the list.
Ultimately, student loans are like any other debt: Getting out from under them requires that you understand your situation and keep your focus on repayment. In this regard, the best advice is also the most obvious. First, be aware of how much money you owe and what the interest rates are on each of your loans. Work on paying off the highest-interest loans first, while making minimum payments on the rest of your loans. As you pay off each loan, take the money that you were spending on it and roll it over onto your highest interest loan.
But, while discipline is good, it's also important to reward yourself. Paying off loans is a big deal: give yourself a nice present every time you put one to bed!