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Cutting Student Loan Payments

June 11, 2014, 10:10 PM by Angela Kennecke

Cutting Student Loan Payments
SIOUX FALLS, SD -

Just Wednesday, Republicans blocked a bill in the Senate, which would have let people refinance their student loan debt at lower rates.  Democrats claimed it could have helped some 25 million borrowers save $2,000 each. 

But borrowers did get another break this week when the President expanded a program called Pay As You Earn. 

Anna Skov graduated from Augustana College in January.  She was supposed to start paying on her $40,000 in student loans this month.

"How am I going to pay rent?  Afford to eat and also make my student loan payments. It was very stressful," Skov said.

Skov is delaying that stress, while adding to it at the same time.  She's headed to grad school and expects to have a total of $100,000 in student loan debt by the time she becomes an occupational therapist. 

"With that daunting price over my head, I feel like even if I make over $100,000 starting out, $100,000 in student loans is a lot of money," Skov said.

Skov likes the Pay As You Earn program, which would limit her payments to ten percent of her discretionary income. 

President Obama's expansion of Pay as You Earn will hopefully get more borrowers to sign up for it.  Last year enrollment increased by 40 percent.  But it's still a fraction of the number of people with student loan debt. 

"When students hear this in the news, borrowers hear this in the news, they're going to think to themselves, 'Maybe this will apply to me.  Maybe I should check on this.'  And I think that's going to be really helpful," Financial Aid Director Brenda Murtha said.

Murtha says the student loan default rate is currently at its highest in 20 years at 10 percent.  But other students say they don't want to pay less per month. They want to see the amount they must borrow decreased. 

"I think making college more affordable in general would be a more suitable tactic they want to go by," Recent Augustana Graduate Jake Shama said.

Because while this latest program expansion ties student loan payments to income, it doesn't do anything about the rising costs of college education.

South Dakota Senator John Thune has introduced legislation that would allow employers to let their workers repay student loans with pre-tax dollars.  The Employer Participation in Refinancing Act would first require employees to refinance their loans into the private market.

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