MIDDLE CLASS PLAN ON COLLEGE AFFORDABILITY

COLLEGE AFFORDABILITY: — Limiting Student Loan Payments to 10 Percent of Discretionary Income. Over the past three decades, college tuition has grown 10 times faster than real median incomes for families with children. About two-thirds of graduates took out loans to pay for college and their average student debt is over $23,000. Debt is particularly burdensome for workers in low-paying public service careers, as well as those who lose their jobs or who did not complete their degree. — The Obama-Biden Administration will expand make student loans more affordable by limiting a borrower’s payments to 10 percent of his or her income above a basic living allowance. It will also keep the total cost of loan repayment manageable by forgiving all remaining debt after 10 years of payments for those in public service work and 20 years for all others. The monthly payment for a single borrower earning $30,000 who owes $20,000 in loans would be $115 a month, compared with $228 a month under the standard 10-year repayment plan. These steps — which build on the Income-Based Repayment plan implemented last summer — will help with the staggering burden of student loan debt and allow a generation of young adults to enter public service and other careers with historically low pay. — The additional flexibility in repaying student loans will complement the Administration’s ambitious agenda to make higher education more affordable, including increasing Pell grants, reforming the student loan program, making permanent the new $2,500 American Opportunity Tax Credit for college costs, expanding low-cost Perkins loans, strengthening community colleges and increasing graduation rates at both two- and four-year institutions