The President recently announced that, under his new program, student loan payments will be no more than 10% of your disposible income. I was sure that I, as a first year associate at a large law firm, wouldn't qualify for such leniency-- but apparently, I do! They'd like to lower my loan payments. How kind.
This is just another perpetual debt trap, and students caught with massive student loan debt should not fall for it. The President's plan is functionally an offer to let you make "minimum payments" on your debt for the next 25 years, as the high, fixed interest rate continues to work its magic.
Instead of letting loan recipients spiral into perpetual debt, it is time to support a real plan to help people do the responsible thing and pay their debt. This is why, instead of offering this specious program, the President should support a modification of the tax code to allow loan recipients to make loan payments out of pretax dollars. This program should be uncapped, available to anyone regardless of income, and put into place immediately. Because there is no cap, it incentivizes aggressive repayment by allowing you to repay yourself into a lower tax bracket.
This program does what a responsible government should do: reward good behavior, namely, repayment of loans. The President's current program, in contrast, just extends the prerogative of perpetual indebtedness to the individual American, where it was previously the exclusive prerogative of the government.
Student loans are obscene. My USAA credit card interest rate is only slightly higher than the fixed rate on my federal student loans. My USAA credit card is in the last position in a bankruptcy and might never recover if I default, but student loans are non-dischargeable. The interest rate on student loans is price gouging, a lulu from the government to itself. This arrangement is downright abusive: if student loans continue to be nondischargeable, their interest rate ought to be capped at 5%.
But that's a big suggestion, and might take some time. So I'll go back to my small suggestion: student loan payments should come out of pretax dollars.
Make it happen. Now.