(CBS) — President Obama says at time when higher education has never been more important, it’s never been more expensive.
On Monday, he expanded a program to make it easier for graduates to make their monthly loan payments. But CBS 2’s Jim Williams reports it could cost them more in the long run.
Erin Clancy and Ariel Neumann are about to graduate from DePaul University. It is an exciting time, but they now face big student loan payments.
“It’s definitely a huge worry just because I know I’m graduating and my job getting out of school isn’t going to be near enough to cover everything I’m going to have to pay back,” said Ariel Neumann.
President Obama, surrounded by young people, signed a memorandum on Monday that lets borrowers pay no more than 10 percent of their monthly income in student loan payments.
“I can’t tell you how many letters I get from people who say I did everything I was supposed to and now I’m finding myself with debts I can’t pay off,” said President Obama.
In the last 30 years, tuition at state universities alone has tripled.
“Students who graduated last year, undergrads who took out loans, graduated average $30,000 in debt,” said Adam Zoll of Morningstar.
Zoll explains there’s a downside in the president’s plan.
“While the monthly payment may go down, the amount of interest paid may actually go up,” he said.
That is because the life of the loan will be longer with lower monthly payments.
Erin Clancy and Aerial Neumann, both economics, have a decision to make.
“I feel if I did extend my loan, I’d just end up paying more interest in the long run,” said Erin Clancy.
Under the president’s plan, an additional five million people would be eligible to lower their monthly college loan payments.
Mr. Obama also endorsed legislation that would allow graduates to refinance their loans. The Senate is expected to debate that bill next week.