Paying off student loans is about to become less of a headache.
In an exercise of the regulatory executive power, President Barack Obama announced Wednesday an initiative to reduce the amount of student loan debt - now second to mortgages as the largest source of household debt.
Under Obama's "We Can't Wait" campaign, a series of executive regulations that will be implemented without congressional authority, student loans took a high priority.
The new program will go into effect in 2012 and will allow about 1.6 million students with government loans to cap their annual payments at 10 percent of their discretionary income as reported on their taxes. If the full loan has not been paid off after 20 years, the remaining balance will be dissolved.
Currently, students can cap their payments at 15 percent of their income, and their loans will be forgiven after 25 years.
White House domestic policy adviser Melody Barnes said these changes will not cost tax payers any additional money.
There are about 450,000 graduates enrolled in the current income-based repayment program, a number Barnes said she hopes to see increase with the implementation of the new Pay As You Earn program.
The average tuition and fees for four-year, public universities increased 8.3 percent this year, doubling the inflation rate, according to a recent report from College Board.
These increases in tuition across the country have left the average graduate with $22,000 in loans, the same report stated.
In an effort to streamline the repayment of those loans, Obama also announced an initiative that will allow student borrowers to consolidate multiple loans starting in January.
Under this program, students with multiple loans will be able to make payments to a single lender.
Rick Wilder, interim director for UF's Office of Student Financial Affairs, said consolidating students' multiple loans into one payment plan can only benefit student borrowers.
Once UF students apply for financial aid, they are sent a financial aid package detailing which programs they are eligible for.
This includes a notice of loan disclosure that can sometimes be confusing for students, Wilder said.
Wilder said he supports programs that are geared toward helping students but is concerned about the diminishing support for grant programs. For the 2011-2012 school year, Wilder said UF saw a total of $20 million cut from grants and scholarship programs.
"Any time you can help students manage their loan indebtedness, that's a great thing," he said. "But by supporting grant programs, we could positively impact students' lives without causing them to go further into debt."
