SHERMAN, TX-Student loan debts will hit an all-time high at the end of this year as millions of college students and graduates across the country struggle to pay off their debt. But President Obama has a plan he said will help more than a million people. Victoria Maranan tells us more.
Students loans are the number two source of household debt in the U.S. and it will hit more than $1 trillion by the end of this year, a record high. But President Obama proposed a plan Wednesday to hopefully ease the strain of paying off student loans. I spoke with a recent Austin College graduate who shared with us his reaction to this plan.
Frank McStay graduated from Austin College last May, he said collectors wasted no time reminding him to pay up.
"They contact you basically the day after you graduate through a letter and say, you know, 'you have six months for your grace period and after that, you'll start paying back.' So December 22nd is my day of infamy, I'll start paying back my loans then," he said.
He said he took out eight loans to pay for his education at Austin College.
"Education is expensive and it's very frustrating as a current graduate or a current student that currently, student loans are the only way you can really finance education," he said.
President Obama outlined a plan in front of thousands of college students in Denver, Wednesday that will help ease paying off student loans.
The plan promises to reduce the required monthly payment from 15 percent of the student's income to 10 percent, give students the option to consolidate loans to lower interest rates and forgive the remaining loan balance after 20 years, instead of 25.
"So many of our students do rely heavily on financial aid, it makes it affordable for them. I think just in our freshman class alone 72% of our students demonstrated a need for financial aid."
Austin College public affairs director, Lynn Womble said 95 percent of their students depend on financial aid to go to school and she thought Obama's plan will help.
"I would think the strongest impact is going to help students pursue their dreams. It's going to help them apply to college, make college more affordable for them and create a pathway for them to pursue their dreams," she said.
And McStay agreed.
"It's a great relief for me. Not because I can take advantage of it necessarily, but because my friends who are graduating in 2012, there's a lot of anxiety when you're a college student on what you're going to do afterwards and how you can repay it," he said.
President Obama said he will use his executive authority to push the student loan relief plan through legislators, so it will go into effect by next year, instead of 2014.