President Obama announced a new student loan relief plan intended to help ease the financial hardship of student debt late last month. Though experts are unsure how much the plan, called "Know Before You Owe," will affect Rhode Island, debt remains a pressing issue for students hoping a college degree will give them an advantage in a tough job market.
Starting in January, the "Know Before You Owe" plan will limit repayment of federal student loans to 10 percent of college graduates' discretionary incomes. The change comes almost two years before this cap was slated to take effect under federal law and could benefit as many as 1.6 million low-income borrowers nationally. The new plan also means that — assuming borrowers adhere to their repayment schedules — all of graduates' remaining federal loan debt would be forgiven after 20 years. Under current law, loan debt is forgiven after 25 years.
Rhode Island students who graduated in 2010 had approximately $26,340 in average student debt — the ninth highest in the nation, according to a report released last Thursday by the Project on Student Debt, an initiative of the non-profit Institute for College Access and Success, which analyzes trends in college accessibility.
According the institute, Bryant University had the highest student loan debt of Rhode Island colleges and universities for graduates in 2010, with $39,490 owed on average by its students. The average amount owed by undergraduate students nationally who graduated in 2010 was $25,250.
"Any plan that reduces students' overall debt, their monthly payments and the time taken to repay their debt is a good thing," said Anthony Gallonio, director of financial aid at the Rhode Island School of Design. But the plan is still very new. "As far as the effects that this new plan can have on students, that's still up in the air," he said.
"Student loans are definitely an issue on our campus," said Nick Tsimortos, the student body president of Roger Williams University. "If you talk to anyone just out of college, the number one concern is student loans."
But Tsimortos said he is concerned about the plan's potential contribution to the national debt. "Our society is doing a good job at getting a higher education, but in the process we are indebting ourselves," he said.
The plan has been criticized because it will only apply to current college students, as borrowers are required to owe on student loans taken out in 2012 or later to qualify. "My concern is that I think it affects a small group of people," said James Tilton, director of financial aid at Brown. The plan, he said, does not help people who are already in default but instead attempts to prevent students from reaching this worst-case scenario.
Little is known about the effect President Obama's plan will have on Rhode Island, said Gail Mance-Rios, deputy director of the Rhode Island Higher Education Assistance Authority, a group that helps students in Rhode Island meet the costs of higher education through financial guidance.
"RIHEAA doesn't know exactly how, or to what magnitude, the changes will impact Rhode Island borrowers," she wrote in an email to The Herald. "That remains to be seen."