President Barack Obama's plan to accelerate a measure that would reduce the maximum required payment for student loans from 15 percent of a debt to 10 percent is a good idea and will help many students who are overwhelmed with student loan obligations.
However, the plan should not forgive student loans, even after 20 years, which would set a bad example and be unfair to the many student loan recipients who have exercised the financial discipline to meet their debt obligations. It is important that persons who owe debt pay what they owe. In fact, lowering the required payment has the potential to extend the life of the loan payback.
But that is how it is in the real world. The higher sum that is devoted to a debt, the lower the resulting interest rate. We hope that many former college students, when they have the means to pay more of their debt, decide to pay higher than the minimum required rate. Accumulated interest is a huge barrier towards having a nest egg and more financial security.
We also like a second part of President Obama's plan, which would borrowers to consolidate loans from the Federal Family Education Loan Program and a direct government loan into a single loan. That would decrease the interest of the student loan by a half-percent. That may not sound like much, but it has the potential to save lots of money over the life of the loan.
Student loans are new, growing financial worry. They total $913 billion, more than the entire credit card debt. Graduates and others are facing five-figure debts and even more. Many graduates cannot find degree-based jobs. They are mired in low-paying service-sector jobs and trying to pay the monthly student loan "nut" is a real challenge.
Anything that can be done to help pay off these loans is welcome. We urge bipartisan support of the president's effort on this issue.