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Wed., June 11, 2014

Editorial: Obama executive order eases financial burden of higher education

President Barack Obama’s executive order on college loans will ease the burden for many Americans struggling with debt payments, but the heavy lifting remains on the front end.

Higher education costs have soared, while average American wages have languished, making it more difficult to save.

By now, the numbers have become numbing. Total student loan debt – about $1.1 trillion – exceeds that of credit card holders. The average debt in 2012 was about $29,000, though that figure is skewed by graduate students who roll up massive amounts. The median borrower owed about $12,000, which is more manageable, but still large by historic standards. About 70 percent of seniors took out a student loan.

On Monday, Obama expanded the “Pay As You Earn” plan, which gives borrowers the opportunity to lower their monthly payments as they start their careers. Beginning next year, borrowers would pay no more than 10 percent of their earnings per month, though they remain responsible for the entire amount. Before the expansion, PAYE wasn’t available to those who took out loans before 2007.

The increased flexibility is especially helpful for graduates who start out in low-paying jobs – a common occurrence in this slumbering economy.

An underrated feature of the Obama administration plan is an effort to better educate students and parents about loans as part of a larger effort to help families make wiser higher education choices. The departments of Education and Treasury have been instructed to start loan-counseling programs. Plus, the Education Department is trying to come up with ways to rate colleges and universities. Currently, the feds have no way of weighing the effectiveness of its financial aid programs.

Similarly, “Know Before You Go” bills in the House and Senate would call for higher education institutions to provide more information, so that prospective students could weigh comparable data before deciding where to attend.

Data would include: post-graduation earnings averages; graduation rates for all students (not just first-timers) and the percentage of students who receive the degree they initially sought; average federal loan debt broken down by fields of study; student transfer rates; and the percentage of students seeking advanced degrees.

All of the data would be filtered by the type of financial aid – Stafford loan, Pell grant, GI bill – so the feds could weigh the bang for federal bucks.

In the meantime, students can help themselves by devising a higher education plan and sticking to it. Indecision is awfully expensive these days. Community colleges are lower-cost alternatives for determining career choices and obtaining lower-division course credits.

High tuition will compel students to adapt, which will force colleges and universities to respond. Better data for education shoppers would accelerate the process and deliver greater value.

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Members of The Spokesman-Review editorial board help to determine The Spokesman-Review's position on issues of interest to the Inland Northwest. Board members are:

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