Cost Analysis Shows Obama Loan Plan Won't Save Students Much

Thursday, 27 Oct 2011 12:14 PM

By Jim Meyers

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While the Obama administration is touting the president’s executive order designed to aid Americans saddled with student loan debt, an analysis of the plan shows that it will save the average graduate less than $10 a month.

One component of the order will allow borrowers with direct government loans and government-backed loans to consolidate their balances, which the White House estimates will cut the effective interest rate on loans by up to 0.5 percent.

In 2011, bachelor’s degree recipients graduating with student loan debt had an average balance of $27,204, up from $17,646 a decade ago. Using those figures, The Atlantic magazine calculates that the monthly savings for the average student loan borrower would be between $4.50 and $7.75 a month. Even a graduate with $100,000 in loans would cut monthly payments by just $28.50.

Other components of the executive order also would not have a major impact on graduates’ student loan debt, the Atlantic analysis found.

“While the president’s heart may be in the right place,” The Atlantic noted, “his effort isn’t likely to have much impact.”


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